-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KIBu/yBFXwUVFDoxdCX5euP55HwjfZ+sRq7leLVU58xTTuWi4BUQ+UhYxn9AEXXq ZW0qpbyy8xSvV3MPBeQDXg== 0000950136-08-002482.txt : 20080509 0000950136-08-002482.hdr.sgml : 20080509 20080509160416 ACCESSION NUMBER: 0000950136-08-002482 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 20080331 FILED AS OF DATE: 20080509 DATE AS OF CHANGE: 20080509 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TAL International Group, Inc. CENTRAL INDEX KEY: 0001331745 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 201796526 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-32638 FILM NUMBER: 08818475 BUSINESS ADDRESS: STREET 1: 100 MANHATTANVILLE ROAD CITY: PURCHASE STATE: NY ZIP: 10577 BUSINESS PHONE: 914-251-9000 MAIL ADDRESS: STREET 1: 100 MANHATTANVILLE ROAD CITY: PURCHASE STATE: NY ZIP: 10577 10-Q 1 file1.htm FORM 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period Ended March 31, 2008
or

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from                  to                 

Commission file number- 001-32638

TAL International Group, Inc.

(Exact name of registrant as specified in the charter)


Delaware 20-1796526
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
100 Manhattanville Road,
Purchase, New York
10577-2135
(Address of principal executive office) (Zip Code)

(914) 251-9000
(Registrant’s telephone number including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes [X]    No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer’’ and ‘‘smaller reporting company’’ in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer [ ] Accelerated Filer [X]
Non-accelerated filer [ ] (Do not check if a smaller reporting company) Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).    YES   [ ]        NO   [X]

As of May 2, 2008, there were 32,717,437 shares of the Registrant’s common stock, $.001 par value outstanding.





TAL INTERNATIONAL GROUP, INC.
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Table of Contents

CAUTIONARY STATEMENT FOR PURPOSES OF THE ‘‘SAFE HARBOR’’ PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This Quarterly Report on Form 10-Q contains certain forward-looking statements, including, without limitation, statements concerning the conditions in our industry, our operations, our economic performance and financial condition, including, in particular, statements relating to our business and growth strategy and service development efforts. The Private Securities Litigation Reform Act of 1995 provides a ‘‘safe harbor’’ for certain forward-looking statements so long as such information is identified as forward-looking and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in the information. When used in this Quarterly Report on Form 10-Q, the words ‘‘may’’, ‘‘might’’, ‘‘should’’, ‘‘estimate’’, ‘‘project’’, ‘‘plan’’, ‘‘anticipate’’, ‘‘expect’’, ‘‘intend’’, ‘‘outlook’’, ‘‘believe’’ and other similar expressions are intended to identify forward-looking statements and information. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. These forward-looking statements are based on estimates and assumptions by our management that, although we believe to be reasonable, are inherently uncertain and subject to a number of risks and uncertainties. These risks and uncertainties include, without limitation, those identified under ‘‘Risk Factors’’ in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (‘‘SEC’’), on March 10, 2008, and all of our other filings filed with the SEC from October 11, 2005 through the curren t date pursuant to the Securities Exchange Act of 1934.

We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. Reference is also made to such risks and uncertainties detailed from time to time in our filings with the SEC.

PART I — FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

The consolidated financial statements of TAL International Group, Inc. (‘‘TAL’’ or the ‘‘Company’’) as of March 31, 2008 (unaudited) and December 31, 2007 and for the three months ended March 31, 2008 (unaudited) and March 31, 2007 (unaudited) included herein have been prepared by the Company, without audit, pursuant to U.S. generally accepted accounting principles and the rules and regulations of the SEC. However, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements reflect, in the opinion of management, all adjustments (consisting only of normal recurring adjustme nts) necessary to present fairly the results for the interim periods. The results of operations for such interim periods are not necessarily indicative of the results for the full year. These financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC, on March 10, 2008, from which the accompanying December 31, 2007 Balance Sheet information was derived, and all of our other filings filed with the SEC from October 11, 2005 through the current date pursuant to the Securities Exchange Act of 1934.

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TAL INTERNATIONAL GROUP, INC.

Consolidated Balance Sheets
(Dollars in thousands, except share data)


  March 31,
2008
December 31,
2007
  (Unaudited)  
Assets:    
Cash and cash equivalents (including restricted cash of $17,944 and $18,059) $ 93,483 $ 70,695
Accounts receivable, net of allowances of $548 and $961 50,552 41,637
Net investment in finance leases 196,008 193,986
Leasing equipment, net of accumulated depreciation and allowances of $301,889 and $283,159 1,360,857 1,270,942
Leasehold improvements and other fixed assets, net of accumulated depreciation and amortization of $3,410 and $3,142 2,532 2,767
Equipment held for sale 46,305 35,128
Goodwill 71,898 71,898
Deferred financing costs 7,593 6,880
Other assets (including fair value of derivative instruments) 8,570 11,954
Total assets $ 1,837,798 $ 1,705,887
Liabilities and stockholders’ equity:    
Equipment purchases payable $ 91,159 $ 26,994
Fair value of derivative instruments 50,079 18,726
Accounts payable and other accrued expenses 43,922 36,481
Deferred income tax liability 53,277 55,555
Debt 1,229,794 1,174,654
Total liabilities 1,468,231 1,312,410
Stockholders’ equity:    
Preferred stock, $.001 par value, 500,000 shares authorized, none issued
Common stock, $.001 par value, 100,000,000 shares authorized,
33,482,316 shares issued
33 33
Treasury stock, at cost, 774,379 and 412,279 shares, respectively (17,126 )  (9,171 ) 
Additional paid-in capital 395,510 395,230
Accumulated (deficit) earnings (11,202 )  4,858
Accumulated other comprehensive income 2,352 2,527
Total stockholders’ equity 369,567 393,477
Total liabilities and stockholders’ equity $ 1,837,798 $ 1,705,887

The accompanying notes to the unaudited consolidated financial statements are an integral part of these statements.

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TAL INTERNATIONAL GROUP, INC.

Consolidated Statements of Operations
(Dollars and shares in thousands, except earnings per share)


  Three Months Ended
March 31,
  2008 2007
  (Unaudited)
Revenues:    
Leasing revenues:    
Operating leases $ 72,432 $ 63,980
Finance leases 4,956 4,201
Equipment trading revenue 22,654 9,238
Management fee income 725 1,589
Other revenues 331 564
Total revenues 101,098 79,572
Expenses:    
Equipment trading expenses 19,584 7,399
Direct operating expenses 7,833 7,372
Administrative expenses 10,510 10,254
Depreciation and amortization 26,828 24,496
Provision for doubtful accounts 47 117
Net (gain) on sale of leasing equipment (4,300 )  (2,420 ) 
Interest and debt expense 14,729 11,911
Unrealized loss on interest rate swaps 31,745 3,191
Total expenses 106,976 62,320
(Loss) income before income taxes (5,878 )  17,252
Income tax (benefit) expense (2,085 )  6,166
Net (loss) income $ (3,793 )  $ 11,086
Net (loss) income per common share — Basic $ (0.12 )  $ 0.33
Net (loss) income per common share — Diluted $ (0.12 )  $ 0.33
Weighted average number of common shares outstanding — Basic 32,637 33,184
Weighted average number of common shares outstanding — Diluted 32,637 33,378
Cash dividends paid per common share $ $ 0.30

The accompanying notes to the unaudited consolidated financial statements are an integral part of these statements.

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TAL INTERNATIONAL GROUP, INC.

Consolidated Statements of Cash Flows
(Dollars in thousands)


  Three months ended
March 31,
  2008 2007
  (Unaudited)
Cash flows from operating activities:    
Net (loss) income $ (3,793 )  $ 11,086
Adjustments to reconcile net (loss) income to net cash provided by operating activities:    
Depreciation and amortization 26,828 24,496
Amortization of deferred financing costs 224 230
Net (gain) on sale of leasing equipment (4,300 )  (2,420 ) 
Unrealized loss on interest rate swaps 31,745 3,191
Deferred income taxes (2,278 )  5,886
Stock compensation charge 280 105
Equipment purchased for resale 269 (4,823 ) 
Changes in operating assets and liabilities (15,058 )  (1,868 ) 
Net cash provided by operating activities 33,917 35,883
Cash flows from investing activities:    
Purchases of leasing equipment (64,634 )  (24,719 ) 
Investments in finance leases (5,847 )  (8,663 ) 
Proceeds from sale of equipment leasing fleet, net of selling costs 17,153 14,433
Cash collections on finance lease receivables, net of income earned 6,464 5,131
Other 54 22
Net cash used in investing activities (46,810 )  (13,796 ) 
Cash flows from financing activities:    
Dividends paid (9,959 ) 
Purchase of treasury stock (7,955 ) 
Financing fees paid under debt facilities (937 ) 
Borrowings under debt facilities 103,958 29,788
Payments under debt facilities (56,936 )  (51,001 ) 
Payments under capital lease obligations (2,449 ) 
Decrease in restricted cash 115 10
Net cash provided by (used in) financing activities 35,796 (31,162 ) 
Net increase (decrease) in cash and cash equivalents 22,903 (9,075 ) 
Unrestricted cash and cash equivalents, beginning of period 52,636 43,641
Unrestricted cash and cash equivalents, end of period $ 75,539 $ 34,566
Supplemental non-cash investing activities:    
Accrued and unpaid purchases of equipment $ 91,159 $ 53,212
Purchases of leasing equipment financed through capital lease obligations $ 9,375

The accompanying notes to the unaudited consolidated financial statements are an integral part of these statements.

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TAL INTERNATIONAL GROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Description of the Business, Basis of Presentation, Recently Issued Accounting Pronouncements

A.    Description of the Business

TAL International Group, Inc. (‘‘TAL’’or ‘‘the Company’’) was formed on October 26, 2004 and commenced operations on November 4, 2004. TAL consists of the consolidated accounts of TAL International Container Corporation, formerly known as Transamerica Leasing Inc., Trans Ocean Ltd. and their subsidiaries.

The Company provides long-term leases, service leases and finance leases, along with maritime container management services, through a worldwide network of offices, third party depots and other facilities. The Company operates in both international and domestic markets. The majority of the Company’s business is derived from leasing its containers to shipping line customers through a variety of long-term and short-term contractual lease arrangements. The Company also provides container sales, including the resale of purchased containers and positioning services. TAL also enters into management agreements with third party container owners under which the Company manages the leasing and selling of containers on behalf of the third party owners.

B.    Basis of Presentation

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses during the reporting period and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.

The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Certain reclassifications have been made to the accompanying prior period financial statements and notes to conform with the current year’s presentation.

C.    Recently Issued Accounting Pronouncements

In March 2008, the Financial Accounting Standards Board (‘‘FASB’’) issued Statement of Financial Accounting Standards No. 161 (‘‘SFAS 161’’), Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133. SFAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. SFAS 161 is effective beginning in the first quarter of 2009. The Company is currently evaluating the impact of SFAS 161 on its consolidated results of operations and financial position.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised 2007) (‘‘SFAS 141R’’), Business Combinations and Statement of Financial Accounting Standards No. 160 (‘‘SFAS 160’’), Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No. 51. SFAS 141R will change how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. SFAS 160 will change the accounting and reporting for minority interests, which will be recharacterized a s noncontrolling interests and classified as a component of equity. SFAS 141R and SFAS 160 are effective beginning in the first quarter of 2009. Early adoption is not permitted. Implementation of SFAS 141R is prospective. The Company believes that the adoption of these accounting standards will not have an impact on the Company’s current consolidated results of operations and financial position.

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In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (‘‘SFAS No. 159’’) which permits companies to choose to measure many financial instruments and certain other items at fair value. The Statement’s objective is to improve financial reporting by providing companies with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The Company adopted SFAS No.159 on January 1, 2008 and elected not to fair value its existing financial assets and liabilities, and as a result, there was no impact on its consolidated results of operations and financial posi tion.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (‘‘SFAS No. 157’’) which addresses how companies should measure fair value when they are required to use a fair value measure for recognition or disclosure purposes under generally accepted accounting principles (GAAP). Under SFAS No. 157, there is now a common definition of fair value to be used throughout GAAP. The new standard makes the measurement of fair value more consistent and comparable and improves disclosures about those measures. The Company adopted the provisions of SFAS No. 157 on January 1, 2008, and there was no impact on its consolidated results of operations and financial position.

Note 2 — Treasury Stock and Dividends    

Treasury Stock

The Company repurchased 362,100 shares of its outstanding common stock in the open market during the quarter ended March 31, 2008 at a total cost of approximately $8.0 million.

Dividends

On March 3, 2008, the Company declared a quarterly dividend of $0.375 per share or an aggregate of approximately $12.2 million on its issued and outstanding common stock which was paid on April 10, 2008 to shareholders of record at the close of business on March 20, 2008.

On March 9, 2007, the Company paid a quarterly dividend of $0.30 per share or an aggregate of approximately $10.0 million on its issued and outstanding common stock. The dividend was paid to shareholders of record at the close of business on February 23, 2007.

Note 3 — Stock-Based Compensation Plans

Effective January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (SFAS No.123R) requiring that compensation cost relating to share-based payment transactions be recognized in the financial statements. The cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity award).

Stock Options

There was approximately $6,000 and $7,000 of compensation cost reflected in administrative expense in the Company’s statement of operations for the three months ended March 31, 2008 and March 31, 2007, respectively, related to the Company’s stock-based compensation plans as a result of 21,000 options granted during the year ended December 31, 2006. Total unrecognized compensation cost of approximately $48,000 as of March 31, 2008 related to the new options granted during the year ended December 31, 2006 will be recognized over the remaining vesting period of approximately 2.25 years.

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Stock option activity under the Plans from January 1, 2008 to March 31, 2008 was as follows:


  Options Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Life (Yrs)
Aggregate
Intrinsic
Value
$ in 000’s
Outstanding January 1, 2008 615,192 $ 18.16 7.8  
Granted      
Exercised      
Canceled      
Outstanding March 31, 2008 615,192 $ 18.16 7.6 $ 3,328
Exercisable March 31, 2008 601,692 $ 18.04 7.5 $ 3,327

Restricted Stock

During the year ended December 31, 2007, 132,000 shares of restricted stock were granted and valued with prices ranging from $22.88 to $27.93 per share. Of the 132,000 shares granted in 2007, 65,000 shares were granted for the 2007 benefit year (of which 1,500 shares were cancelled in 2007) and will fully vest on January 1, 2010. The remaining 68,500 shares were granted in December 2007 for the 2008 benefit year and will fully vest on January 1, 2011.

Approximately $274,000 and $98,000 of compensation cost is reflected in administrative expense in the Company’s statements of operations for the three months ended March 31, 2008 and March 31, 2007, respectively, as a result of the restricted shares granted during 2007. Total unrecognized compensation cost of approximately $2.4 million as of March 31, 2008 related to restricted shares granted during 2007 will be recognized over the remaining vesting period of approximately 2.3 years.

Note 4 — Debt

Debt consisted of the following (amounts in thousands):


  March 31,
2008
December 31,
2007
Asset backed securitization (ABS)    
Term notes $ 549,667 $ 566,667
Warehouse facility 425,000 379,500
Asset backed credit facility
Revolving credit facility 100,000 98,500
Finance lease facility 48,600 49,500
Term loan 38,483 20,000
Port equipment facility 15,674 15,043
Capital lease obligations 52,370 45,444
Total $ 1,229,794 $ 1,174,654

Asset Backed Credit Facility

On March 27, 2008, TAL Advantage II, LLC, an indirect wholly owned subsidiary of TAL International Group, Inc., entered into a $125 million dollar Asset Backed Credit Facility. The facility has a 15 month revolving credit period that preceeds a nine year term period in which the outstanding balance amortizes in equal monthly installments. The proceeds will be used to support future capital expenditures. TAL International Group, Inc. has guaranteed the obligations of TAL Advantage II, LLC under the facility. There were no borrowings outstanding under this facility as of March 31, 2008.

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Interest Rate Swaps

As of March 31, 2008, the Company had in place total interest rate swap contracts to fix the floating interest rates on a portion of the borrowings under its debt facilities as summarized below:    


Total Notional
Amount at
March 31, 2008
Weighted Average Fixed Leg
Interest Rate at March 31, 2008
Weighted Average
Remaining Term
$1,105 million 4.3 %  3.4 years

The fair values of the interest rate swap contracts were reflected in the consolidated balance sheets as follows ($ in millions):    


  March 31,
2008
December 31,
2007
Fair value of derivative instruments — net liability $ 50.0 $ 17.9
Fair value of derivative instruments — asset $ 0.1 $ 0.8
Fair value of derivative instruments — liability $ 50.1 $ 18.7

Under the criteria established by SFAS No.157, the fair value measurements of the derivative instruments are based on significant other observable inputs other than quoted prices, either on a direct or indirect basis (Level 2), using valuation techniques the Company believes are appropriate.

In its consolidated statements of operations, the Company recognized a net unrealized loss of $31.7 million for the three months ended March 31, 2008 and a net unrealized loss of $3.2 million for the three months ended March 31, 2007, which predominantly represents the change in fair value of the interest rate swap contracts, as well as amortization of other comprehensive income amounts previously recorded during the designation period of the interest rate swaps.

Prior to April 12, 2006, the Company had designated all existing interest rate swap contracts as cash flow hedges, in accordance with Statement of Financial Accounting Standards No.133, ‘‘Accounting for Derivative Instruments and Hedging Activities’’. Therefore, during the designation period beginning November 1, 2005 through April 12, 2006, substantially all changes in the fair value of the interest rate swap contracts were reflected in accumulated other comprehensive income. Changes in the fair value of these interest rate swap contracts in periods before and after designation have been recognized in the consolidated statements of operations as unrealized losses or gains on interest rate swaps.

At the time of de-designation on April 12, 2006, the change in fair value reflected in accumulated other comprehensive income was $7.5 million. This amount is being recognized in income as unrealized (gain) loss on interest rate swaps using the interest method over the remaining life of the contracts. As of March 31, 2008, the unamortized pre-tax balance of the change in fair value reflected in accumulated other comprehensive income was $3.0 million. The amount of other comprehensive income which will be amortized to income over the next 12 months is approximately $1.1 million. Amounts recorded in accumulated other comprehensive income would be reclassified into earnings upon termination of these interest rate swap contracts and related debt instruments prior to their contractual maturity.

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Note 5 — (Loss) Earnings Per Share

The following table sets forth the calculation of basic and diluted (loss) earnings per share for the three months ended March 31, 2008 and 2007 (in thousands, except earnings per share):


  Three Months Ended
March 31,
  2008 2007
Numerator:    
Net (loss) income applicable to common stockholders for basic and diluted (loss) earnings per share $ (3,793 )  $ 11,086
Denominator:    
Weighted average shares outstanding for basic (loss) earnings per share 32,637 33,184
Dilutive stock options 194
Weighted average shares for diluted (loss) earnings per share 32,637 33,378
(Loss) earnings per share:    
Basic $ (0.12 )  $ 0.33
Diluted $ (0.12 )  $ 0.33

Due to the net loss incurred for the quarter ended March 31, 2008, net shares of restricted stock and options to purchase shares of common stock of 132,181 were not included in the calculation of weighted average shares for diluted earnings per share because their effects were antidilutive.

Note 6 — Segment and Geographic Information

Industry Segment Information

The Company conducts its business activities in one industry, intermodal transportation equipment, and has two segments:

  Equipment leasing — the Company owns, leases and ultimately disposes of containers and chassis from its lease fleet, as well as manages leasing activities for containers owned by third parties.
  Equipment trading — the Company purchases containers from shipping line customers, and other sellers of containers, and sells these containers to container traders and users of containers for storage, one way shipment or other uses.

The following tables show segment information for the three months ended March 31, 2008 and March 31, 2007, and the consolidated totals reported (dollars in thousands):


2008 Equipment
Leasing
Equipment
Trading
Totals
Total revenue $ 78,355 $ 22,743 $ 101,098
Equipment trading expense 19,584 19,584
Depreciation expense 26,823 5 26,828
Net (gain) on sale of equipment (4,300 )  (4,300 ) 
Interest expense 14,480 249 14,729
Pre-tax income(1) 24,868 999 25,867
Goodwill at March 31 70,898 1,000 71,898
Total assets at March 31 1,803,543 34,255 1,837,798
Purchases of leasing equipment 70,481 70,481
(1) Segment income before taxes excludes unrealized losses on interest rate swaps of $31,745.

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2007 Equipment
Leasing
Equipment
Trading
Totals
Total revenue $ 70,195 $ 9,377 $ 79,572
Equipment trading expense 7,399 7,399
Depreciation expense 24,493 3 24,496
Net (gain) on sale of equipment (2,420 )  (2,420 ) 
Interest expense 11,764 147 11,911
Pre-tax income(2) 19,603 840 20,443
Goodwill at March 31 70,898 1,000 71,898
Total assets at March 31 1,473,655 15,997 1,489,652
Purchases of leasing equipment 33,382 33,382
(2) Segment income before taxes excludes unrealized losses on interest rate swaps of $3,191.

Note: There are no intercompany revenues or expenses between segments. Additionally, certain administrative expenses have been allocated between segments based on an estimate of services provided to each segment.

Geographic Segment Information

The Company’s customers use the Company’s containers throughout their many worldwide trade routes. Substantially all of the Company’s leasing related revenues are denominated in U.S. dollars. The following table represents the allocation of domestic and international revenues for the periods indicated based on the customers’ primary domicile (in thousands):


  Three Months Ended
March 31,
  2008 2007
Total revenues:    
Domestic $ 9,780 $ 8,014
Asia 48,593 37,691
Europe 34,537 27,767
Other International 8,188 6,100
Total $ 101,098 $ 79,572

As all of the Company’s containers are used internationally, where no one container is domiciled in one particular place for a prolonged period of time, substantially all of the Company’s containers are considered to be international.

Note 7 — Commitments and Contingencies

At March 31, 2008, commitments for capital expenditures totaled approximately $60.9 million, through the remainder of 2008.

Note 8 — Income Taxes

The consolidated income tax expense for the three month periods ended March 31, 2008 and 2007 was determined based upon estimates of the Company’s consolidated effective income tax rates for the years ending December 31, 2008 and 2007, respectively. The difference between the consolidated effective income tax rate and the U.S. federal statutory rate is primarily attributable to state income taxes, foreign income taxes and the effect of certain permanent differences.

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Note 9 — Comprehensive (Loss) Income and Other

The following table provides a reconciliation of the Company’s net (loss) income to comprehensive (loss) income (in thousands):


  Three Months Ended
March 31,
  2008 2007
Net (loss) income $ (3,793 )  $ 11,086
Other comprehensive (loss) income:    
Foreign currency translation adjustments 54 22
Amortization of net unrealized gains on derivative instruments previously designated as cash flow hedges (net of tax expense of $127 and $225, respectively) (229 )  (405 ) 
Total $ (3,968 )  $ 10,703

The balance included in comprehensive (loss) income for cumulative translation adjustments as of March 31, 2008 and December 31, 2007 was $448 and $394, respectively.

The Company recorded $1.2 million of unrealized foreign currency exchange gains which are reported in administrative expenses in the Company’s statement of operations in the quarter ended March 31, 2008, which resulted primarily from fluctuations on 6.2 million Euro denominated long-term net finance lease receivables. The Company recorded $0.1 million of unrealized foreign currency exchange gains in the quarter ended March 31, 2007.

Note 10 — Subsequent Events

Quarterly Dividend

On May 1, 2008 the Company’s Board of Directors approved and declared a $0.4125 per share quarterly cash dividend on its issued and outstanding common stock, payable on June 12, 2008 to shareholders of record at the close of business on May 22, 2008.

ABS Warehouse Facility — Conversion to Term Loan

On April 12, 2008, the Company’s ABS Warehouse Facility automatically converted to a term loan, with a slightly higher interest margin, payable in equal monthly installments over nine years. The balance outstanding under the facility on the conversion date was $425 million.

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ITEM 2:  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the consolidated financial condition and results of operations of TAL International Group, Inc. and its subsidiaries should be read in conjunction with related consolidated financial data and our annual audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2008. The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described under ‘‘Risk Factors’’ and ‘‘Forward-Looking Statements’’ in our Form 10-K. Our actual results may differ materially from those contained in or implied by any forward-looking statements.

Our Company

We are one of the world’s largest and oldest lessors of intermodal containers and chassis. Intermodal containers are large, standardized steel boxes used to transport freight by ship, rail or truck. Because of the handling efficiencies they provide, intermodal containers are the primary means by which many goods and materials are shipped internationally. Chassis are used for the transportation of containers domestically.

We operate our business in one industry, intermodal transportation equipment, and have two business segments:

  Equipment leasing — we own, lease and ultimately dispose of containers and chassis from our lease fleet, as well as manage leasing activities for containers owned by third parties.
  Equipment trading — we purchase containers from shipping line customers, and other sellers of containers, and sell these containers to container traders and users of containers for storage, one way shipment or other uses.

Operations

Our operations include the acquisition, leasing, re-leasing and subsequent sale of multiple types of intermodal containers and chassis. As of March 31, 2008, our total fleet consisted of 713,828 containers and chassis, including 31,005 containers under management for third parties, representing 1,165,712 twenty-foot equivalent units (TEU). We have an extensive global presence, offering leasing services through 20 offices in 11 countries and 186 third party container depot facilities in 37 countries as of March 31, 2008. Our customers are among the largest shipping lines in the world.

We primarily lease three principal types of equipment: (1) dry freight containers, which are used for general cargo such as manufactured component parts, consumer staples, electronics and apparel, (2) refrigerated containers, which are used for perishable items such as fresh and frozen foods, and (3) special containers, which are used for heavy and oversized cargo such as marble slabs, building products and machinery. In 2005, we started leasing chassis, which are used for the transportation of containers domestically via rail and roads, and recently we began to lease tank containers, which are used to transport bulk liquid products such as chemicals. In addition, in December 2006 we entered into our first port equipment finance transaction in which we financed several container cranes, reach stackers and related equipment. We believe that these new equipment types represent natural extensions for our business.

Our in-house equipment sales group manages the sale process for our used containers and chassis from our equipment leasing fleet and buys and sells new and used containers and chassis acquired from third parties.

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The following tables provide the composition of our equipment fleet as of the dates indicated below (in both units and TEU’s):


  Equipment Fleet in Units
  March 31, 2008 December 31, 2007 March 31, 2007
  Owned Managed Total Owned Managed* Total Owned Managed Total
Dry 566,767 26,612 593,379 549,800 27,087 576,887 497,180 53,667 550,847
Refrigerated 36,905 826 37,731 36,650 861 37,511 34,648 1,024 35,672
Special 43,350 3,567 46,917 42,049 3,619 45,668 29,084 14,465 43,549
Tank 472 472 110 110
Chassis 8,855 8,855 7,955 7,955 7,078 7,078
Equipment leasing fleet 656,349 31,005 687,354 636,564 31,567 668,131 567,990 69,156 637,146
Equipment trading fleet 26,474 26,474 14,583 14,583 11,879 11,879
Total 682,823 31,005 713,828 651,147 31,567 682,714 579,869 69,156 649,025
Percentage 95.7 %  4.3 %  100.0 %  95.4 %  4.6 %  100.0 %  89.3 %  10.7 %  100.0 % 

  Equipment Fleet in TEU’s
  March 31, 2008 December 31, 2007 March 31, 2007
  Owned Managed Total Owned Managed* Total Owned Managed Total
Dry 914,531 46,584 961,115 886,816 47,315 934,131 796,049 91,968 888,017
Refrigerated 67,350 1,372 68,722 66,625 1,436 68,061 62,820 1,617 64,437
Special 72,336 5,960 78,296 69,544 6,023 75,567 46,927 24,099 71,026
Tank 472 472 110 110
Chassis 15,723 15,723 13,924 13,924 12,406 12,406
Equipment leasing fleet 1,070,412 53,916 1,124,328 1,037,019 54,774 1,091,793 918,202 117,684 1,035,886
Equipment trading fleet 41,384 41,384 19,371 19,371 17,422 17,422
Total 1,111,796 53,916 1,165,712 1,056,390 54,774 1,111,164 935,624 117,684 1,053,308
Percentage 95.4 %  4.6 %  100.0 %  95.1 %  4.9 %  100.0 %  88.8 %  11.2 %  100.0 % 
* The decrease in our managed equipment fleet from March 31, 2007 to December 31, 2007 is primarily due to our purchase of approximately 34,000 units or approximately 57,000 TEU of managed containers from a third party owner in October 2007. The units are included in our owned equipment fleet as of December 31, 2007.

We generally lease our equipment on a per diem basis to our customers under three types of leases: long-term leases, service leases and finance leases. Long-term leases, typically with terms of three to eight years, provide us with stable cash flow and low transaction costs by requiring customers to maintain specific units on-hire for the duration of the lease. Service leases command a premium per diem rate in exchange for providing customers with a greater level of operational flexibility by allowing the pick-up and drop-off of units during the lease term. Finance leases, which are typically structured as full payout leases, provide for a predictable recurring revenue stream with the lowest daily cost to the customer because customers are generally required to retain the equipment for the duration of its useful life. As of March 31, 2008, approximately 89% of our containers and chassis were on-hire to customers, with approximately 53% of our equi pment on long-term leases, approximately 10% on finance leases and approximately 26% on service leases or long-term leases whose fixed terms have expired but for which the related units remain on-hire and for which we continue to receive rental payments. In addition, approximately 8% of our fleet was available for lease and approximately 3% was available for sale.

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The following table provides a summary of our lease portfolio, based on units in the total fleet as of the dates indicated below:


Lease Portfolio March 31,
2008
December 31,
2007
March 31,
2007
Long-term lease 52.9 %  55.1 %  57.0 % 
Service lease 26.5 26.6 25.5
Finance lease 9.8 9.9 8.3
Total leased 89.2 91.6 90.8
Used units available for lease 2.9 2.8 3.8
New units not yet leased 5.1 3.0 2.8
Available for sale 2.8 2.6 2.6
Total fleet 100.0 %  100.0 %  100.0 % 

Operating Performance

Our profitability is primarily determined by the extent to which our leasing and other revenues exceed our ownership, operating and administrative expenses. Our profitability is also impacted by the gain or loss that we realize on the sale of our used equipment and the net sales margins on our equipment trading activities. Our profitability for the first quarter of 2008 was supported by high starting utilization in all of our major product lines, strong gains on the sale of used containers, and strong sales margins from our equipment trading activity.

Our leasing revenue is primarily driven by our owned fleet size, utilization and average rental rates. Our leasing revenue is also impacted by the mix of leases in our portfolio.

As of March 31, 2008, our owned fleet included 1,111,796 TEU, an increase of 5.2% from December 31, 2007 and up 18.8% from March 31, 2007. The increase in fleet size in 2008 relative to the first quarter of 2007 was mainly due to the delivery of a large number of containers during the second and third quarters of 2007, as well as the purchase of approximately 57,000 TEU of previously managed containers from a third party owner in October 2007. In addition, our container fleet has increased in the first quarter of 2008 due to the purchase of new containers for our leasing fleet and the purchase of a large number of older used containers for our trading fleet. Most of the used containers purchased during the first quarter of 2008 for our trading fleet were acquired through purchase leaseback transactions with a number of our shipping line customers, and we expect these containers to be returned to us for sale over the next severa l quarters.

As of March 31, 2008, our revenue earning assets (leasing equipment, net investment in finance leases, and equipment held for sale) totaled approximately $1,603.2 million, an increase of $103.1 million, or 6.9% over December 31, 2007 and an increase of $301.5 million, or 23.2% over March 31, 2007. Our revenue earning asset growth has been higher on a dollar basis than our fleet growth has been on a TEU basis due to our large purchases of refrigerated containers, chassis and tank containers, which are much more expensive than dry containers on a per TEU basis. In addition, the growth of our fleet has decreased the average age and increased the average net book value of the units in our owned fleet.

We expect that our owned fleet will continue to grow this year on both a TEU and dollar basis. Through April 15, 2008, we have accepted or placed orders for approximately 80,000 TEU of new equipment. While we have secured lease commitments for a significant portion of these ordered units, further procurement will be contingent on the pace of our success with leasing out the remaining uncommitted units.

In the first quarter of 2008, we sold approximately 16,000 TEU of our owned containers, or 1.5% of our beginning owned container equipment leasing fleet. This annualized disposal rate of approximately 6% is similar to the 6-8% annual disposal rate we have been experiencing for the last few years, and generally consistent with our expected long-term average disposal rate given the 12 – 14 year expected useful life of our containers. However, based on the age profile of our leasing fleet and scheduled

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lease expirations, we expect that our rate of disposals will begin increasing later this year and remain at an above-average level for several years before decreasing significantly for several years thereafter. During years of above-average disposals, our TEU growth rate may be constrained if we are unable to generate a sufficient number of attractive lease transactions for an expanded level of container purchases.

The following table sets forth our average equipment fleet utilization for the periods indicated below:


  March 31,
2008
December 31,
2007
September 30,
2007
June 30,
2007
March 31,
2007
  3 months 3 months 3 months 3 months 3 months
Average Utilization(1) 90.1 %  91.9 %  91.0 %  90.3 %  92.1 % 
(1) Utilization is computed by dividing our total units on lease by the total units in our fleet (which includes leased units, new and used units available for lease and units available for sale).

The following tables set forth our ending fleet utilization for the dates indicated below:


  March 31,
2008
December 31,
2007
September 30,
2007
June 30,
2007
March 31,
2007
Ending Utilization 89.2 %  91.6 %  92.4 %  89.7 %  90.8 % 

  March 31,
2008
December 31,
2007
September 30,
2007
June 30,
2007
March 31,
2007
Ending Utilization (excluding new units not yet leased) 94.0 %  94.4 %  95.5 %  94.8 %  93.9 % 

Our average utilization was 90.1% in the first quarter of 2008, a decrease of 2.0% from the first quarter of 2007, and a decrease of 1.8% from the fourth quarter of 2007. Ending utilization decreased 2.4% from 91.6% as of December 31, 2007 to 89.2% as of March 31, 2008. The decrease in our utilization in the first quarter of 2008 relative to the first quarter of 2007 was mainly the result of an increase in the number of new units not yet leased.

We increased our first quarter new container orders this year as a result of a higher than normal level of dry container leasing activity in the first quarter. The first quarter typically represents the seasonal low point for dry container demand, and we usually generate the majority of our lease commitments during the peak season for dry containers in the second and third quarters. However, this year we benefited from increased customer interest in negotiating dry container lease agreements early in the year. While we expect most of the committed units to go on-hire during the second quarter, we placed orders for new containers for first quarter delivery in order to ensure we could meet any requirements for early pick-ups and to lock-in the manufacturing prices for the committed containers.

Idle new units typically have a limited impact on our profitability since they usually do not incur storage or depreciation charges. Ending utilization, excluding new units not yet leased, was 94.0% at the end of the first quarter of 2008 compared to 93.9% as of March 31, 2007 and 94.4% as of December 31, 2007. The utilization of our existing fleet was supported by continued worldwide containerized trade growth and a reluctance by our shipping line customers to place large orders for new containers due to the high current price for new containers and possibly the recent capital markets disruptions. Industry experts continue to project that containerized trade growth will remain in the 10% range for 2008 despite the slowdown in the U.S. economy as strong growth in the Asia to Europe and intra-Asia trades is expected to continue to make up for slow growth in the Asia to North America trade. Of course, containerized trade growth would be negativ ely impacted if the U.S. economy performs worse than expected or if other major economies begin to slow in response to the economic challenges in the U.S.

Leasing demand for our refrigerated and special containers remained strong in the first quarter of 2008. The utilization of our refrigerated and special containers does not heavily influence our overall utilization since they represent only approximately 12% of the units in our fleet. However, these

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container types are significantly more expensive than dry containers, generate higher per diem lease rates and currently represent approximately 36% of our leasing revenue. We have increased procurement levels for refrigerated containers and special containers in response to the ongoing high level of demand. Leasing demand for our chassis product line was weak during the first quarter due to low U.S. import growth and an oversupply of chassis in the marketplace.

Average lease rates for our dry container product line in the first quarter of 2008 were relatively flat compared to the average level of the first quarter of 2007 and the fourth quarter of 2007. New container prices have been increasing since the end of 2007 primarily due to increasing steel prices, and the price for a 20’ dry container was in the range of $2,300 at the end of first quarter of 2008. Market leasing rates for new dry container transactions increased in the first quarter in line with the increase in container prices, but our average lease rates in the first quarter have not yet been significantly impacted by this.

Average lease rates for refrigerated containers in the first quarter of 2008 were also relatively flat compared to the first quarter of 2007, and the fourth quarter of 2007, while average rental rates for our special containers were 3.4% higher during the first quarter of 2008 compared to the first quarter of 2007, and 0.8% higher compared to the fourth quarter of 2007. The increase in average leasing rates for special containers was primarily caused by strong demand and increased prices for special containers.

During the first quarter of 2008, the percentage of our units on finance leases increased to 9.8% compared to 8.3% as of March 31, 2007. Finance lease revenue increased from $4.2 million to $5.0 million for the three months ended March 31, 2008 as compared to the prior year period. While our finance lease revenue was $0.8 million higher for the three months ended March 31, 2008 compared to the comparable period in 2007, the increase in the portion of our units covered by finance leases resulted in a reduction in leasing revenue compared to the amount we would have recognized if the units were placed on operating leases. For a finance lease, the lease payment from the customer is split into interest and principal components, and we only recognize the interest component as revenue while the principal component decreases the carrying value of the finance lease on the balance sheet. For an operating lease, the entire leas e payment is recognized as revenue, while the carrying value of the container equipment is reduced through depreciation expense. For the first quarter of 2008, our finance lease billings exceeded our recognized finance lease revenue by $6.5 million, while in the first quarter of 2007, our finance lease billings exceeded our recognized lease revenue by $5.1 million.

During the first quarter of 2008, we recognized a $4.3 million gain on the sale of our used containers compared to a $2.4 million gain in the first quarter of 2007. The improvement compared to the first quarter of 2007 mainly resulted from an increase in equipment selling prices. Selling prices for our used containers have been supported by high new container prices and high utilization of leasing company and shipping line owned containers, which decreases the supply of used containers for sale.

Our ownership expenses, principally depreciation and interest expense increased by $5.2 million, or 14.1% in the first quarter of 2008 from the first quarter of 2007. The percentage increase in ownership expense was less than the 23.2% increase in the net book value of our revenue earning assets since depreciation expense has been growing relatively slowly. Over the last few years we have been steadily increasing the average sale age of our containers, and an increasing portion of our containers have become fully depreciated. As a result, our depreciation expense increased only 9.5% despite the larger increase in our revenue earning assets. Our interest expense increased 23.7% in the first quarter of 2008 compared to the first quarter of 2007, relatively in-line with the increase in the net book value of our revenue earning assets.

Dividends

On March 3, 2008, we declared a quarterly dividend of $0.375 per share or an aggregate of approximately $12.2 million on our issued and outstanding common stock which was paid on April 10, 2008 to shareholders of record at the close of business on March 20, 2008.

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On March 9, 2007, we paid a quarterly dividend of $0.30 per share or an aggregate of approximately $10.0 million on our issued and outstanding common stock. The dividend was paid to shareholders of record at the close of business on February 23, 2007.

Treasury Stock

We repurchased 362,100 shares of its outstanding common stock in the open market during the quarter ended March 31, 2008 at a total cost of approximately $8.0 million.

Results of Operations

The following table summarizes our results of operations for the three months ended March 31, 2008 and 2007 in thousands of dollars and as a percentage of total revenues:


  Three Months Ended March 31,
  2008 2007
  Dollars Percent Dollars Percent
Leasing revenues $ 77,388 76.6 %  $ 68,181 85.7 % 
Equipment trading revenue 22,654 22.4 9,238 11.6
Management fee income 725 0.7 1,589 2.0
Other revenues 331 0.3 564 0.7
Total revenues 101,098 100.0 79,572 100.0
Equipment trading expenses 19,584 19.4 7,399 9.3
Direct operating expenses 7,833 7.8 7,372 9.2
Administrative expenses 10,510 10.4 10,254 12.9
Depreciation and amortization 26,828 26.5 24,496 30.8
Provision for doubtful accounts 47 0.0 117 0.1
Net (gain) on sale of leasing equipment (4,300 )  (4.3 )  (2,420 )  (3.0 ) 
Interest and debt expense 14,729 14.6 11,911 15.0
Unrealized loss on interest rate swaps 31,745 31.4 3,191 4.0
Total expenses 106,976 105.8 62,320 78.3
(Loss) income before income taxes (5,878 )  (5.8 )  17,252 21.7
Income tax (benefit) expense (2,085 )  (2.1 )  6,166 7.8
Net (loss) income $ (3,793 )  (3.7 )%  $ 11,086 13.9 % 

Comparison of Three Months Ended March 31, 2008 to Three Months Ended March 31, 2007.

Leasing revenues.    The principal components of our leasing revenues are presented in the following table. Per diem revenue represents revenue earned under operating lease contracts; fee and ancillary lease revenue represent fees billed for the pick-up and drop-off of containers in certain geographic locations and billings of certain reimbursable operating costs such as repair, handling, and repositioning expenses; and finance lease revenue represents interest income earned under finance lease contracts.


  Three Months Ended March 31,
  2008 2007
  (in thousands)
Leasing revenues:    
Operating lease revenues:    
Per diem revenue $ 64,067 $ 56,786
Fee and ancillary lease revenue 8,365 7,194
Total operating lease revenue 72,432 63,980
Finance lease revenue 4,956 4,201
Total leasing revenues $ 77,388 $ 68,181

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Total leasing revenues were $77.4 million for the three months ended March 31, 2008, compared to $68.2 million for the three months ended March 31, 2007, an increase of $9.2 million, or 13.5%. The increase in leasing revenues primarily resulted from an increase in fleet size for all of our primary equipment types. While our finance lease revenue was $0.8 million higher for the three months ended March 31, 2008 compared to the same period in 2007, the increase in the portion of our units covered by finance leases resulted in a reduction in leasing revenue compared to the amount we would have recognized if the units were placed on operating leases. For a finance lease, the lease payment from the customer is split into interest and principal components, and we only recognize the interest component as revenue while the principal component decreases the carrying value of the finance lease on the balance sheet. For an operating lease, the entire lease payment is recognized as revenue, while the carrying value of the container equipment is reduced through depreciation expense. For the first quarter of 2008, our finance lease billings exceeded our recognized finance lease revenue by $6.5 million, while in the first quarter of 2007, our finance lease billings exceeded our recognized lease revenue by $5.1 million.

Equipment Trading Activities.    Equipment trading revenue represents the proceeds on the sale of equipment purchased for resale. Equipment trading expenses represent the cost of equipment sold as well as related selling costs.


  Three Months Ended March 31,
  2008 2007
  (in thousands)
Equipment trading revenues $ 22,654 $ 9,238
Equipment trading expenses (19,584 )  (7,399 ) 
Gross equipment trading margin $ 3,070 $ 1,839

The gross equipment trading margin increased $1.2 million for the three months ended March 31, 2008 compared to the three months ended March 31, 2007 primarily due to a higher volume of units purchased and sold, partially offset by lower sales margins.

Direct operating expenses.    Direct operating expenses primarily consist of our costs to repair containers and chassis returned off lease, to store the equipment when it is not on lease, and to reposition equipment that has been returned to locations with weak leasing demand.

During the three months ended March 31, 2008, direct operating expenses were $7.8 million, compared to $7.4 million for the three months ended March 31, 2007, an increase of $0.4 million or 5.4% due to an increase in storage and handling and surveying costs.

Depreciation and amortization.    Depreciation and amortization was $26.8 million for the three months ended March 31, 2008, compared to $24.5 million for the three months ended March 31, 2007, an increase of $2.3 million or 9.4%. The increase was primarily due to a larger fleet size, which was partially offset by a decrease due to another vintage year of older equipment becoming fully depreciated in the fourth quarter of 2007.

Net (gain) on sale of leasing equipment.    (Gain) on sale of equipment was $(4.3) million for the three months ended March 31, 2008, compared to a (gain) of $(2.4) million for the three months ended March 31, 2007, an increase of $1.9 million due primarily to higher equipment selling prices.

Interest and debt expense.    Interest and debt expense was $14.7 million for the three months ended March 31, 2008, compared to $11.9 million for the three months ended March 31, 2007, an increase of $2.8 million. The increase was primarily due to an increase in the average debt balance driven by the increase in the size of our container fleet.

Unrealized loss on interest rate swaps.    Unrealized loss on interest rate swaps was $31.7 million for the three months ended March 31, 2008, compared to an unrealized loss of $3.2 million for the three months ended March 31, 2007. The net fair value of the interest rate swap contracts was a net liability of $50.0 million at March 31, 2008, compared to a net liability of $17.9 million at December 31, 2007, with the decrease in fair value due to a decrease in interest rates.

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Income tax (benefit) expense.    Income tax (benefit) was $(2.1) million for the three months ended March 31, 2008, compared to an income tax expense of $6.2 million for the three months ended March 31, 2007, and the effective tax rates were 35.5% for the three months ended March 31, 2008 and 35.7% for the three months ended March 31, 2007.

While we record income tax expense, we do not currently pay any significant federal, state or foreign income taxes due to the availability of accelerated tax depreciation for our equipment.  The vast majority of the expense recorded for income taxes is recorded as a deferred income tax liability on the balance sheet. We expect the deferred income tax liability balance to grow for the foreseeable future.

Business Segments

We operate our business in one industry, intermodal transportation equipment, and in two business segments:

  Equipment leasing — we own, lease and ultimately dispose of containers and chassis from our lease fleet, as well as manage leasing activities for containers owned by third parties. Equipment leasing segment revenues represent leasing revenues from operating and finance leases, fees earned on managed container leasing activities, as well as other revenues. Expenses related to equipment leasing include direct operating expenses, administrative expenses, depreciation expense, and interest expense. The equipment leasing segment also includes gains and losses on the sale of owned leasing equipment.
  Equipment trading — we purchase containers from shipping line customers and other sellers of containers, and sell these containers to container traders and users of containers for storage, one-way shipment or other uses. Equipment trading segment revenues represent the proceeds on the sale of containers purchased for resale. Expenses related to equipment trading include the cost of containers purchased for resale that were sold and related selling costs, as well as direct operating expenses, administrative expenses and interest expense.

The following table lists selected revenue and expense items for our business segments for the three months ended March 31, 2008 and 2007:    


  Three Months Ended March 31,
  2008 2007
  (dollars in thousands)
Equipment leasing segment:    
Total revenue $ 78,355 $ 70,195
Depreciation expense 26,823 24,493
Net (gain) on sale of leasing equipment (4,300 )  (2,420 ) 
Interest expense 14,480 11,764
Pre-tax income(1) 24,868 19,603
Equipment trading segment:    
Equipment trading revenue 22,654 9,238
Equipment trading expense 19,584 7,399
Interest expense 249 147
Pre-tax income(1) 999 840
(1) Pre-tax income excludes unrealized gains and losses on interest rate swaps.

Equipment Trading Segment: Our gross equipment trading margin, the difference between equipment trading revenue and expense, increased by $1.2 million for the quarter ended March 31, 2008 compared to the quarter ended March 31, 2007. However, pre-tax income for the Equipment Trading Segment increased only $0.2 million over the same period, primarily due to an increase in allocated expenses. Corporate expenses are allocated to the Equipment Trading Segment primarily based upon the volume of units sold from the equipment trading fleet, and equipment trading sales volumes were significantly higher in the first quarter of 2008 than they were in the first quarter of 2007.

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Liquidity and Capital Resources    

Our principal sources of liquidity are cash flows generated from operations and borrowings under our credit facilities. Our cash flows are used to finance capital expenditures, provide working capital, meet debt service requirements, and pay dividends. We believe that cash from operations and existing cash, together with available borrowings under our credit facilities, will be sufficient to meet our working capital requirements, and our scheduled interest and debt payments for at least the next twelve months. However, our ability to make future capital expenditures and fully implement our current growth plans is dependent on our ability to increase our lending commitments.

On March 27, 2008, we obtained $125 million of new asset backed financing, and we expect this new facility to enable us to meet our asset growth plans for the remainder of 2008. We continue to seek additional sources of financing to fund our growth plans beyond 2008, although disruptions in the capital markets still exist, and this may make it more difficult and more expensive to secure additional financing commitments for future asset growth.

At March 31, 2008, our outstanding indebtedness was comprised of the following (amounts in millions):


  Current
Amount
Outstanding
Current
Maximum
Commitment
Level
ABS Term Notes $ 549.7 $ 549.7
ABS Warehouse Facility 425.0 425.0
Asset Backed Credit Facility 125.0
Revolving Credit Facility 100.0 100.0
Term Loan 38.5 38.5
Finance Lease Facility 48.6 50.0
Port Equipment Facility 15.7 15.7
Capital Lease Obligations 52.3 52.3
Total Debt $ 1,229.8 $ 1,356.2

The maximum commitment levels depicted in the chart above may not reflect the actual availability under all of the credit facilities.  Certain of these facilities are governed by borrowing bases that limit borrowing capacity to an established percentage of relevant assets.

The Company is subject to various covenant requirements under its debt facilities. At March 31, 2008, the Company was in compliance with all covenants.

Dividends

On March 3, 2008, we declared a quarterly dividend of $0.375 per share or an aggregate of approximately $12.2 million on our issued and outstanding common stock which was paid on April 10, 2008 to shareholders of record at the close of business on March 20, 2008.

On March 9, 2007, we paid a quarterly dividend of $0.30 per share or an aggregate of approximately $10.0 million on our issued and outstanding common stock. The dividend was paid to shareholders of record at the close of business on February 23, 2007.

Treasury Stock

We repurchased 362,100 shares of our outstanding common stock in the open market during the quarter ended March 31, 2008 at a total cost of approximately $8.0 million.

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Cash Flow    

The following table sets forth certain cash flow information for the three months ended March 31, 2008 and 2007 (in thousands):


  Three Months Ended March 31,
  2008 2007
Net cash provided by operating activities $ 33,917 $ 35,883
Net cash (used in) provided by investing activities:    
Purchases of leasing equipment $ (64,634 )  $ (24,719 ) 
Investment in finance leases (5,847 )  (8,663 ) 
Proceeds from sale of equipment leasing fleet, net of selling costs 17,153 14,433
Cash collections on finance lease receivables, net of income earned 6,464 5,131
Other 54 22
Net cash (used in) investing activities $ (46,810 )  $ (13,796 ) 
Net cash provided by (used in) financing activities $ 35,796 $ (31,162 ) 

Operating Activities

Net cash provided by operating activities decreased by $2.0 million to $33.9 million in the three months ended March 31, 2008, compared to $35.9 million in the three months ended March 31, 2007 due to timing of cash collections on our accounts receivable.

Investing Activities

Net cash used in investing activities was $46.8 million in the three months ended March 31, 2008, as compared to $13.8 million in the three months ended March 31, 2007. Capital expenditures were $70.5 million, including investments in finance leases of $5.8 million, in the three months ended March 31, 2008, compared to $33.4 million, including investments in finance leases of $8.7 million, in the three months ended March 31, 2007. Capital expenditures increased by $37.1 million primarily due to higher per unit costs, as well as an increase in the number of new units purchased. In addition, we had received but not yet paid for leasing equipment of $91.2 million in the three months ended March 31, 2008 as compared to $53.2 million in the three months ended March 31, 2007. Sales proceeds from the disposal of equipment increased $2.8 million to $17.2 mi llion in the three months ended March 31, 2008, compared to $14.4 million in the three months ended March 31, 2007. The increase in sales proceeds is primarily due to higher selling prices. Cash collections on finance leases, net of income earned increased by $1.4 million to $6.5 million for the three months ended March 31, 2008, compared to $5.1 million for the three months ended March 31, 2007 as a result of an increase in our finance lease portfolio.

Financing Activities

Net cash provided by financing activities was $35.8 million for the three months ended March 31, 2008, compared to net cash used in financing activities of $(31.2) million for the three months ended March 31, 2007. During the three months ended March 31, 2008, we increased our borrowings under our ABS Warehouse Facility, our Revolving Credit Facility, and our term loan facility, the proceeds of which were primarily used to finance the purchase of new equipment. These borrowings were partially offset by net cash used to pay down borrowings on our ABS term notes, other debt facilities and capital lease obligations. In addition, $8.0 million in cash was used to purchase treasury shares during the quarter ended March 31, 2008.

During the three months ended March 31, 2007, we increased borrowings under our ABS Warehouse Facility and other debt facilities, the proceeds of which were primarily used to finance the purchase of new equipment. This was offset by net cash used to pay down borrowings on our ABS term notes and revolving credit facilities. Additionally, cash was used during the first quarter 2007 to pay dividends of $10.0 million on our common stock outstanding.

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Contractual Obligations

We are party to various operating and capital leases and are obligated to make payments related to our long term borrowings. We are also obligated under various commercial commitments, including obligations to our equipment manufacturers. Our equipment manufacturer obligations are in the form of conventional accounts payable, and are satisfied by cash flows from operating and long term financing activities.

The following table summarizes our contractual obligations and commercial commitments as of March 31, 2008:


  Contractual Obligations by Period
  (dollars in millions)
Contractual Obligations: Total Remaining 2008 2009 2010 2011 2012 and
thereafter
Total debt obligations(1) $ 1,416.3 $ 139.2 $ 180.8 $ 204.0 $ 162.4 $ 729.9
Capital lease obligations 67.6 2.2 5.8 6.0 6.0 47.6
Operating leases (mainly facilities) 6.6 2.0 2.7 1.2 0.5 0.2
Purchase obligations:            
Equipment purchases payable 91.2 91.2
Equipment purchase commitments 60.9 60.9
Total contractual obligations $ 1,642.6 $ 295.5 $ 189.3 $ 211.2 $ 168.9 $ 777.7
(1) Amounts include actual and estimated interest for floating-rate debt based on March 31, 2008 rates and the net effect of the interest rate swaps.

Off-Balance Sheet Arrangements

At March 31, 2008, we did not have any relationships with unconsolidated entities or financial partnerships, such entities which are often referred to as structured finance or special purpose entities, which were established for the purpose of facilitating off-balance sheet arrangements. We are, therefore, not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Critical Accounting Policies

Our consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which require us to make estimates and assumptions that affect the amounts and disclosures reported in the consolidated financial statements and accompanying notes. Our estimates are based on historical experience and currently available information. Actual results could differ from such estimates. The following paragraphs summarize our critical accounting policies. Additional accounting policies are discussed in the notes to our 2007 Form 10-K and elsewhere in this Form 10-Q.

Revenue Recognition

Operating Leases with Customers

We enter into long-term leases and service leases with ocean carriers, principally as lessor in operating leases, for marine cargo equipment. Long-term leases provide our customers with specified equipment for a specified term. Our leasing revenues are based upon the number of equipment units leased, the applicable per diem rate and the length of the lease. Long-term leases typically range for a period of three to eight years. Revenues are recognized on a straight-line basis over the life of the respective lease. Advanced billings are deferred and recognized in the period earned. Service leases do not specify the exact number of equipment units to be leased or the term that each unit will remain

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on-hire but allow the lessee to pick up and drop off units at various locations specified in the lease agreement. Under a service lease, rental revenue is based on the number of equipment units on hire for a given period. Revenue for customers where collection is not reasonably assured is deferred and recognized when the amounts are received. Also, in accordance with EITF No. 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent, we recognize billings to customers for damages incurred and certain other pass through costs as leasing revenue as it is earned based on the terms of the contractual agreements with the customer.

Finance Leases with Customers

We enter into finance leases as lessor for some of the equipment in our fleet. The net investment in finance leases represents the receivables due from lessees, net of unearned income. Unearned income is recognized on a level yield basis over the lease term and is recorded as leasing revenue. Finance leases are usually long-term in nature, typically ranging for a period of five to ten years and typically include a bargain purchase option to purchase the equipment at the end of the lease term.

Leasing Equipment

Leasing equipment is recorded at cost and depreciated to an estimated residual value on a straight-line basis over the estimated useful life. We will continue to review our depreciation policies on a regular basis to determine whether changes have taken place that would suggest that a change in our depreciation policies, useful lives of our equipment or the assigned residual values is warranted. In addition, periodically a determination is made, if indicators of impairment are present, as to whether the carrying value of our fleet exceeds its estimated future undiscounted cash flows. The estimated useful lives for our leasing equipment ranges from 10 to 20 years from the date of manufacture. Estimated useful lives have been based on independent appraisals and will be adjusted if necessary based on actual experience. Costs incurred to place new equipment into service, including costs to transport the equipment to its initial on-hire location, are capitalized. We charge inspection costs on new equipment and repair and maintenance costs that do not extend the lives of the assets at the time the costs are incurred, and include these costs in direct operating expenses.

An allowance is provided through direct operating expenses based on the net book value of a percentage of the units on lease to certain customers that are considered to be non-performing which we believe we will not ultimately recover. The percentage is developed based on historical experience.

Equipment Held for Sale

In accordance with the Financial Accounting Standards Board (‘‘FASB’’) Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (‘‘SFAS No. 144’’), equipment held for sale is carried at the lower of its fair value, based on current transactions, less costs to sell or carrying value; depreciation on such assets is halted and disposals generally occur within ninety days. Subsequent changes to the asset’s fair value, either increases or decreases, are recorded as adjustments to the carrying value of the equipment held for sale; however, any such adjustments would not exceed the equipment’s carrying value at the time it was initially classified as held for sale. Initial write-downs of assets held for sale are recorded as an impairment ch arge and are included in net (gain) on sale of leasing equipment. Realized gains and losses resulting from the sale of equipment held for sale are recorded as a net (gain) on sale of leasing equipment.

Allowance for Doubtful Accounts

Our allowance for doubtful accounts is updated on a regular basis and is based upon a review of the collectibility of our receivables. This review considers the risk profile of the customer, credit quality indicators such as the level of past-due amounts and economic conditions. An account is considered past due when a payment has not been received in accordance with the contractual terms. Accounts are generally charged off after an analysis is completed which indicates that collection of the full principal balance is in doubt. Changes in economic conditions or other events may necessitate

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additions or deductions to the allowance for doubtful accounts. The allowance for doubtful accounts is intended to provide for losses inherent in our receivables, and requires the application of estimates and judgments as to the outcome of collection efforts and the realization of collateral, among other things. We believe our allowance for doubtful accounts is adequate to provide for credit losses inherent in our existing receivables. However, actual losses could exceed the amounts provided for in certain periods.

Recently Issued Accounting Pronouncements    

In March 2008, the Financial Accounting Standards Board (‘‘FASB’’) issued Statement of Financial Accounting Standards No. 161 (‘‘SFAS 161’’), Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133. SFAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. SFAS 161 is effective beginning in the first quarter of 2009. The Company is currently evaluating the impact of SFAS 161 on its consolidated results of operations and financial position.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised 2007) (‘‘SFAS 141R’’), Business Combinations and Statement of Financial Accounting Standards No. 160 (‘‘SFAS 160’’), Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No. 51. SFAS 141R will change how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. SFAS 160 will change the accounting and reporting for minority interests, which will be recharacterized a s noncontrolling interests and classified as a component of equity. SFAS 141R and SFAS 160 are effective beginning in the first quarter of 2009. Early adoption is not permitted. Implementation of SFAS 141R is prospective. The Company believes that the adoption of these accounting standards will not have an impact on the Company’s current consolidated results of operations and financial position.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (‘‘SFAS No. 159’’) which permits companies to choose to measure many financial instruments and certain other items at fair value. The Statement’s objective is to improve financial reporting by providing companies with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The Company adopted SFAS No.159 on January 1, 2008 and elected not to fair value its existing financial assets and liabilities, and as a result, there was no impact on its consolidated results of operations and financial posi tion.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (‘‘SFAS No. 157’’) which addresses how companies should measure fair value when they are required to use a fair value measure for recognition or disclosure purposes under generally accepted accounting principles (GAAP). Under SFAS No. 157, there is now a common definition of fair value to be used throughout GAAP. The new standard makes the measurement of fair value more consistent and comparable and improve disclosures about those measures. The Company adopted the provisions of SFAS No. 157 on January 1, 2008, and there was no impact on its consolidated results of operations and financial position.

ITEM 3:  Quantitative and Qualitative Disclosures About Market Risk

Market risk represents the risk of changes in value of a financial instrument, derivative or non-derivative, caused by fluctuations in interest rates, foreign exchange rates and equity prices. Changes in these factors could cause fluctuations in results of our operations and cash flows. In the ordinary course of business, we are exposed to foreign currency, interest rate, and credit risks.

Foreign Currency Exchange Rate Risk

Although we have significant foreign-based operations, the U.S. dollar is the operating currency for the large majority of our leases (both customers obligations and company obligations), and most of

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our revenues and expenses in 2008 and 2007 were denominated in U.S. dollars. However, we recorded $1.2 million of unrealized foreign currency exchange gains in the quarter ended March 31, 2008 which resulted primarily from fluctuations on 6.2 million Euro denominated long-term net finance lease receivables.

Interest Rate Risk    

We enter into interest rate swap contracts to fix the interest rates on a portion of our debt. We assess and manage the external and internal risk associated with these derivative instruments in accordance with the overall operating goals. External risk is defined as those risks outside of our direct control, including counterparty credit risk, liquidity risk, systemic risk and legal risk. Internal risk relates to those operational risks within the management oversight structure and includes actions taken in contravention of our policy.

The primary external risk of our interest rate swap contracts is counterparty credit exposure, which is defined as the ability of a counterparty to perform its financial obligations under a derivative contract. All derivative agreements are with major money center financial institutions rated investment grade by nationally recognized rating agencies, with our counterparties rated ‘‘A’’ or better. Credit exposures are measured based on the market value of outstanding derivative instruments. Both current exposures and potential exposures are calculated for each derivative contract to monitor counterparty credit exposure.

As of March 31, 2008, the Company had in place total interest rate swap contracts to fix the floating interest rates on a portion of the borrowings under its debt facilities as summarized below:    


Total Notional Amount at March 31, 2008 Weighted Average Fixed
Leg Interest Rate at
March 31, 2008
Weighted Average
Remaining Term
$1,105 million 4.3 %  3.4 years

Changes in the fair value on these interest rate swap contracts will be recognized in the consolidated statements of operations as unrealized gains or losses on interest rate swaps.

Since approximately 90% of our debt is hedged using interest rate swaps, our interest expense is not significantly affected by changes in interest rates. However, our earnings are impacted by changes in interest rate swap valuations which cause gains or losses to be recorded. During the quarter ended March 31, 2008, unrealized losses on interest rate swaps totaled $31.7 million, compared to unrealized losses on interest rate swaps of $3.2 million for the quarter ended March 31, 2007.

Credit Risk

We maintain detailed credit records regarding our customers and set maximum exposure limits for our significant customers based on our review of these records. Credit criteria include, but are not limited to, customer payment history, customer financial position and performance (e.g., net worth, leverage, profitability, trade routes, country of domicile, social and political climate, and the type of, and location of, containers that are to be supplied.) We diligently monitor our customers’ performance and our lease exposures on an ongoing basis, and our credit management processes are aided by the long payment experience we have with most of our customers and our broad network of long-standing relationships in the shipping industry that provide current information about our customers.

For the three months ended March 31, 2008, our five largest customers accounted for approximately 47% of our leasing revenues, with our largest customer accounting for approximately 17% of our leasing revenues. As of March 31, 2008, approximately 72% of our containers were on-hire to our 20 largest customers.

The allowance for doubtful accounts is an estimate of allowances necessary on our lease receivables.

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ITEM 4.  CONTROLS AND PROCEDURES.

Based upon the required evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (the ‘‘Exchange Act’’)), our President and Chief Executive Officer and our Vice President and Chief Financial Officer concluded that as of March 31, 2008 our disclosure controls and procedures were adequate and effective to ensure that information was gathered, analyzed and disclosed on a timely basis.

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our fiscal quarter ended March 31, 2008, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION    

ITEM 1.  LEGAL PROCEEDINGS.

From time to time, we are a party to litigation matters arising in connection with the normal course of our business. While we cannot predict the outcome of these matters, in the opinion of our management, based on information presently available to us, we believe that we have adequate legal defenses, reserves or insurance coverage and any liability arising from these matters will not have a material adverse effect on our business. Nevertheless, unexpected adverse future events, such as an unforeseen development in our existing proceedings, a significant increase in the number of new cases or changes in our current insurance arrangements could result in liabilities that have a material adverse impact on our business.

ITEM 1A.  RISK FACTORS.

For a complete listing of our risk factors, refer to our 2007 Form 10-K filed with the Securities and Exchange Commission on March 10, 2008.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS AND ISSUER REPURCHASES OF EQUITY SECURITIES

On March 13, 2006, our Board of Directors authorized a stock repurchase program for the repurchase of up to 1.5 million shares of our common stock. On September 5, 2007, our Board of Directors authorized a 1.0 million increase to the Company’s stock repurchase program that began in March 2006. The stock repurchase program, as amended, authorizes the Company to repurchase up to 2.5 million shares of its common stock. The Company’s share purchase activity during the quarter ended March 31, 2008 is summarized in the following table:


Period Total Number of
Shares Purchased
Average Price Paid
per Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans
or Programs
January 1 – 31, 2008 362,100 $ 21.97 362,100 1,725,621

There were no shares purchased by the Company during the months of February and March 2008.

ITEM 6.  EXHIBITS.

Exhibit
Number
Exhibit Description
10.52* Indenture, dated as of March 27, 2008, by and between TAL Advantage II LLC and U. S. Bank National Association
10.53* Series 2008-1 Supplement, dated as of March 27, 2008, by and between TAL Advantage II LLC and U. S. Bank National Association
10.54* Management Agreement dated as of March 27, 2008, by and between TAL Advantage II LLC and TAL International Container Corporation
10.55* Contribution and Sale Agreement, dated as of March 27, 2008, by and between TAL Advantage II LLC and TAL International Container Corporation
10.56* Series 2008-1 Note Purchase Agreement, dated as of March 27, 2008, by and among TAL Advantage II LLC, Fortis Capital Corp., the other purchasers party thereto from time to time and the other parties named therein
10.57* Guaranty dated March 27, 2008 made by TAL International Group, Inc.
31.1* Certification of the Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended

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Exhibit
Number
Exhibit Description
31.2* Certification of the Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended
32.1* Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350
32.2* Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350
* Filed herewith.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


  TAL International Group, Inc.
May 9, 2008    
  /s/ Chand Khan
  Chand Khan
  Senior Vice President and
Chief Financial Officer
(Principal Accounting Officer)

29




EX-10.52 2 file2.htm INDENTURE, DATED AS OF MARCH 27, 2008

TAL ADVANTAGE II LLC

Issuer

and

U.S. BANK NATIONAL ASSOCIATION,

Indenture Trustee

 

INDENTURE

Dated as of March 27, 2008

 

 

 



Table of Contents

 

 

 

 

 

Page

         

ARTICLE I

         

DEFINITIONS

         

Section 101.

 

Defined Terms

 

3

Section 102.

 

Other Definitional Provisions

 

3

Section 103.

 

Computation of Time Periods

 

3

Section 104.

 

Duties of Administrative Agent

 

3

Section 105.

 

General Interpretive Principles

 

4

Section 106.

 

Statutory References

 

4

         

ARTICLE II

         

THE NOTES

         

Section 201.

 

Authorization of Notes

 

4

Section 202.

 

Form of Notes; Global Notes

 

5

Section 203.

 

Execution; Recourse Obligation

 

7

Section 204.

 

Certificate of Authentication

 

7

Section 205.

 

Registration; Registration of Transfer and Exchange of Notes

 

7

Section 206.

 

Mutilated Destroyed, Lost and Stolen Notes

 

10

Section 207.

 

Delivery, Retention and Cancellation of Notes

 

11

Section 208.

 

ERISA Deemed Representations

 

11

         

ARTICLE III

         

PAYMENT OF NOTES; STATEMENTS TO NOTEHOLDERS

         

Section 301.

 

Principal and Interest

 

11

Section 302.

 

Trust Account

 

12

Section 303.

 

Investment of Monies Held in the Trust Account, the Restricted Cash Account, and Series Accounts; Control over Eligible Investments

 

17

Section 304.

 

Reports to Noteholders

 

19

Section 305.

 

Records

 

19

Section 306.

 

Restricted Cash Account

 

19

Section 307.

 

CUSIP Numbers

 

20

Section 308.

 

No Claim

 

20

Section 309.

 

Compliance with Withholding Requirements

 

20

Section 310.

 

Tax Treatment of Notes

 

21

         

ARTICLE IV

         

COLLATERAL

         

Section 401.

 

Collateral

 

21

Section 402.

 

Pro Rata Interest

 

22

Section 403.

 

Indenture Trustee’s Appointment as Attorney-in-Fact

 

22

Section 404.

 

Release of Security Interest

 

23

 

 

i

 



Table of Contents

(continued)

 

 

 

 

 

Page

Section 405.

 

Administration of Collateral

 

23

Section 406.

 

Quiet Enjoyment

 

25

         

ARTICLE V

         

RIGHTS OF NOTEHOLDERS; ALLOCATION AND APPLICATION OF COLLECTIONS; REQUISITE GLOBAL MAJORITY

         

Section 501.

 

Rights of Noteholders

 

25

Section 502.

 

Collections and Allocations

 

25

Section 503.

 

Determination of Requisite Global Majority

 

25

         

ARTICLE VI

         

COVENANTS

         

Section 601.

 

Payment of Principal and Interest; Payment of Taxes

 

26

Section 602.

 

Maintenance of Office

 

26

Section 603.

 

Corporate Existence

 

27

Section 604.

 

Protection of Collateral

 

27

Section 605.

 

Performance of Obligations

 

27

Section 606.

 

Negative Covenants

 

28

Section 607.

 

Non-Consolidation of the Issuer

 

29

Section 608.

 

No Bankruptcy Petition

 

29

Section 609.

 

Liens

 

30

Section 610.

 

Other Debt

 

30

Section 611.

 

Guarantees, Loans, Advances and Other Liabilities

 

30

Section 612.

 

Consolidation, Merger and Sale of Assets

 

30

Section 613.

 

Other Agreements; Amendment of Transaction Documents

 

30

Section 614.

 

Charter Documents

 

31

Section 615.

 

Capital Expenditures

 

31

Section 616.

 

Permitted Activities; Compliance with Organizational Documents

 

31

Section 617.

 

Investment Company Act

 

31

Section 618.

 

Payments of Collateral

 

31

Section 619.

 

Notices

 

31

Section 620.

 

Books and Records

 

31

Section 621.

 

Subsidiaries

 

32

Section 622.

 

Investments

 

32

Section 623.

 

Use of Proceeds

 

32

Section 624.

 

Asset Base Certificate

 

32

Section 625.

 

Financial Statements

 

32

Section 626.

 

UNIDROIT Convention

 

33

Section 627.

 

Other Information

 

33

Section 628.

 

Hedging Requirement

 

33

Section 629.

 

Ownership of Issuer

 

34

Section 630.

 

Intentionally Omitted

 

34

Section 631.

 

Tax Election of the Issuer

 

34

Section 632.

 

Rating Agency Notices

 

34

Section 633.

 

Compliance with Law

 

34

 

 

ii

 



Table of Contents

(continued)

 

 

 

 

 

Page

         

ARTICLE VII

         

DISCHARGE OF INDENTURE; PREPAYMENTS

         

Section 701.

 

Full Discharge

 

34

Section 702.

 

Prepayment of Notes

 

34

Section 703.

 

Unclaimed Funds

 

35

         

ARTICLE VIII

         

DEFAULT PROVISIONS AND REMEDIES

         

Section 801.

 

Event of Default

 

36

Section 802.

 

Acceleration of Stated Maturity; Rescission and Annulment

 

39

Section 803.

 

Collection of Indebtedness

 

40

Section 804.

 

Remedies

 

41

Section 805.

 

Indenture Trustee May Enforce Claims Without Possession of Notes

 

41

Section 806.

 

Allocation of Money Collected

 

42

Section 807.

 

Limitation on Suits

 

43

Section 808.

 

Unconditional Right of Noteholders to Receive Principal, Interest and Commitment Fees

 

44

Section 809.

 

Restoration of Rights and Remedies

 

44

Section 810.

 

Rights and Remedies Cumulative

 

44

Section 811.

 

Delay or Omission Not Waiver

 

44

Section 812.

 

Control by Requisite Global Majority

 

44

Section 813.

 

Waiver of Past Defaults

 

45

Section 814.

 

Undertaking for Costs

 

45

Section 815.

 

Waiver of Stay or Extension Laws

 

45

Section 816.

 

Sale of Collateral

 

45

Section 817.

 

Action on Notes

 

46

         

ARTICLE IX

         

CONCERNING THE INDENTURE TRUSTEE

         

Section 901.

 

Duties of the Indenture Trustee

 

46

Section 902.

 

Certain Matters Affecting the Indenture Trustee

 

48

Section 903.

 

Indenture Trustee Not Liable

 

49

Section 904.

 

Indenture Trustee May Own Notes

 

49

Section 905.

 

Indenture Trustee’s Fees and Expenses

 

49

Section 906.

 

Eligibility Requirements for the Indenture Trustee

 

50

Section 907.

 

Resignation and Removal of the Indenture Trustee

 

50

Section 908.

 

Successor Indenture Trustee

 

51

Section 909.

 

Merger or Consolidation of the Indenture Trustee

 

51

Section 910.

 

Separate Indenture Trustees, Co-Indenture Trustees and Custodians

 

51

Section 911.

 

Representations and Warranties

 

53

Section 912.

 

Indenture Trustee Offices

 

54

 

 

iii

 



Table of Contents

(continued)

 

 

 

 

 

Page

         

Section 913.

 

Notice of Event of Default

 

54

Section 914.

 

Notices

 

54

         

ARTICLE X

         

SUPPLEMENTAL INDENTURES

         

Section 1001.

 

Supplemental Indentures Not Creating a New Series Without Consent of Noteholders

 

55

Section 1002.

 

Supplemental Indentures Not Creating a New Series with Consent of Noteholders

 

56

Section 1003.

 

Execution of Supplemental Indentures

 

57

Section 1004.

 

Effect of Supplemental Indentures

 

57

Section 1005.

 

Reference in Notes to Supplemental Indentures

 

57

Section 1006.

 

Issuance of Series of Notes

 

57

         

ARTICLE XI

         

NOTEHOLDERS LISTS

         

Section 1101.

 

Issuer to Furnish Indenture Trustee Names and Addresses of Noteholders

 

59

Section 1102.

 

Preservation of Information; Communications to Noteholders

 

59

         

ARTICLE XII

         

EARLY AMORTIZATION EVENTS

         

Section 1201.

 

Early Amortization Events

 

59

Section 1202.

 

Remedies

 

60

         

ARTICLE XIII

         

MISCELLANEOUS PROVISIONS

         

Section 1301.

 

Compliance Certificates and Opinions

 

60

Section 1302.

 

Form of Documents Delivered to Indenture Trustee

 

61

Section 1303.

 

Acts of Noteholders

 

61

Section 1304.

 

Inspection

 

61

Section 1305.

 

Limitation of Right

 

62

Section 1306.

 

Severability

 

62

Section 1307.

 

Notices

 

62

Section 1308.

 

Consent to Jurisdiction

 

64

Section 1309.

 

Captions

 

64

Section 1310.

 

Governing Law

 

64

Section 1311.

 

No Petition

 

64

Section 1312.

 

WAIVER OF JURY TRIAL

 

64

Section 1313.

 

Waiver of Immunity

 

65

Section 1314.

 

Judgment Currency

 

65

Section 1315.

 

Hedge Counterparty

 

65

 

 

iv

 



Table of Contents

(continued)

 

 

 

 

 

Page

         

Section 1316.

 

Consents and Approvals

 

66

Section 1317.

 

Counterparts

 

66

 

 

 

 

 

Schedule I

 

Maximum Concentrations for Lessees

 

 

 

 

 

 

 

EXHIBIT A

-

Form of Non-Recourse Release

 

 

EXHIBIT B

-

Investment Letter

 

 

EXHIBIT C

-

Form of Control Agreement

 

 

EXHIBIT D

-

Depreciation Methods by Type of Managed Container

 

 

EXHIBIT E

-

Form of Asset Base Certificate

 

 

EXHIBIT F

 

Interest Rate Hedge Agreement Policy

 

 

 

 

 

 

 

APPENDIX A

-

Master Index of Defined Terms

 

 

 

 

v

 



This Indenture, dated as of March 27, 2008 (as amended, modified or supplemented from time to time as permitted hereby, this “Indenture”), between TAL ADVANTAGE II LLC, a limited liability company organized under the laws of Delaware (the “Issuer”), and U.S. Bank National Association, a national banking association, as the Indenture Trustee (the “Indenture Trustee”).

Each party agrees as follows for the benefit of the other party, the Noteholders, each Series Enhancer, if any, and each Eligible Hedge Counterparty.

GRANTING CLAUSE

To secure the payment of all Outstanding Obligations and the performance of all of the Issuer’s covenants and agreements in this Indenture and all other Transaction Documents, the Issuer hereby grants, assigns, conveys, mortgages, pledges, hypothecates and transfers to the Indenture Trustee, for the benefit of Noteholders, each Series Enhancer, if any, and each Hedge Counterparty, a security interest in and to all of the Issuer’s right, title and interest in, to and under the following, whether now existing or hereafter created or acquired: (i) the Managed Containers (including any and all substitutions therefor acquired from time to time) and other Transferred Assets, (ii) the Trust Account, the Restricted Cash Account, any Series Account and all amounts and Eligible Investments, Financial Assets, Investment Property, Securities Entitlements and all other instruments, assets or amounts credited to any of the foregoing or otherwise on deposit from time to time in the foregoing, (iii) the Contribution and Sale Agreement, all Hedge Agreements, the Management Agreement and the Intercreditor Agreement, (iv) all other assets and properties of the Issuer, whether now existing or hereafter acquired, (v) all income, payments and proceeds of the foregoing and all other assets granted, assigned, conveyed, mortgaged, pledged, hypothecated and transferred to the Indenture Trustee pursuant to this clause, and (vi) all of the following, whether now existing or hereafter acquired:

(a) All Accounts;

(b) All Chattel Paper;

(c) All Lease Agreements;

(d) All Contracts;

(e) All Documents;

(f) All General Intangibles;

(g) All Instruments;

(h) All Inventory;

(i) All Supporting Obligations;

(j) All Equipment;

(k) All Letter-of-Credit Rights;

(l) All Commercial Tort Claims;

(m) All Investment Property;

 

 



(n) All Deposit Accounts;

(o) All property of the Issuer held by the Indenture Trustee including, without limitation, all property of every description now or hereafter in the possession or custody of or in transit to the Indenture Trustee for any purpose, including, without limitation, safekeeping, collection or pledge, for the account of the Issuer, or as to which the Issuer may have any right or power;

(p) To the extent not included above and without limiting the foregoing, all Chattel Paper, all Leases and all schedules, supplements, amendments, modifications, renewals, extensions, and guarantees thereof in every case whether now owned or hereafter acquired and all amounts, rentals, proceeds and other sums of money due and to become due under the Container Related Agreements, including (in each case only to the extent related to the Managed Containers), without limitation, (i) all rentals, payments and other monies, including all insurance payments and claims for losses due and to become due to the Issuer under, and all claims for damages arising out of the breach of, any Container Related Agreement; (ii) the right of the Issuer to terminate, perform under, or compel performance of the terms of the Container Related Agreements; (iii) any guarantee of the Container Related Agreements and (iv) any rights of the Issuer in respect of any subleases or assignments permitted under the Container Related Agreements;

(q) All insurance proceeds of the Collateral and all proceeds of the voluntary or involuntary disposition of the Collateral or such proceeds;

(r) Any and all payments made or due to the Issuer in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any Governmental Authority and any other cash or non-cash receipts from the sale, exchange, collection or other disposition of the Collateral; and

(s) To the extent not otherwise included, all income and Proceeds of each of the foregoing and all accessions to, substitutions and replacements for, and rents, profits and products of each of the foregoing.

All of the property described in this Granting Clause is herein collectively called the “Collateral” and as such is security for all Outstanding Obligations; provided that notwithstanding anything to the contrary in this Indenture, Collateral shall not include monies paid to the Issuer under this Indenture, including monies received by the Issuer pursuant to Section 302 or Section 806.

The Indenture Trustee acknowledges such Grant, accepts the trusts hereunder in accordance with the provisions hereof, and agrees to perform the duties herein required as hereinafter provided. Notwithstanding the foregoing, the Indenture Trustee does not assume, and shall have no liability to perform, any of the Issuer’s obligations under any agreement included in the Collateral and shall have no liability arising from the failure of the Issuer or any other Person to duly perform any such obligations.

 

 

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ARTICLE I

DEFINITIONS

Section 101. Defined Terms. Capitalized terms used in this Indenture shall have the meanings set forth in Appendix A hereto and the definitions of such terms shall be equally applicable to both the singular and plural forms of such terms.

Section 102. Other Definitional Provisions. (a) With respect to any Series, all terms used herein and not otherwise defined herein shall have meanings ascribed to such terms in the related Supplement.

(b) As used in this Indenture and in any certificate or other document made or delivered pursuant hereto, accounting terms not defined in this Indenture or in any such certificate or other document, and accounting terms partly defined in this Indenture or in any such certificate or other document to the extent not defined, shall have the respective meanings given to them under GAAP consistently applied. To the extent that the definitions of accounting terms in this Indenture or in any such certificate or other document are inconsistent with the meanings of such terms under GAAP or regulatory accounting principles, the definitions contained in this Indenture or in any such certificate or other document shall control.

(c) With respect to any Collection Period, the “related Record Date,” the “related Determination Date,” and the “related Payment Date” shall mean the Record Date occurring on the last Business Day of such Collection Period and the Determination Date and Payment Date occurring in the month immediately following the end of such Collection Period.

(d) With respect to any Series of Notes, the “related Supplement” shall mean the Supplement pursuant to which such Series of Notes is issued and the “related Series Enhancer” shall mean the Series Enhancer for such Series of Notes.

(e) With respect to any ratio analysis required to be performed as of the most recently completed fiscal quarter of a Person, the most recently completed fiscal quarter shall mean the most recently completed fiscal quarter for which financial statements were required hereunder to have been delivered.

(f) With respect to the calculations of the ratios set forth in this Indenture, the components of such calculations are to be determined in accordance with GAAP, consistently applied, with respect to the Issuer or the Manager, as the case may be.

Section 103. Computation of Time Periods. Unless otherwise stated in this Indenture or any Supplement, in the computation of a period of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each means “to but excluding.”

Section 104. Duties of Administrative Agent. All of the duties and responsibilities of the Administrative Agent set forth in this Indenture, any Supplement or any other Transaction Document are subject in all respects to the terms and conditions of the Administration Agreement. Each of the Issuer, the Indenture Trustee and, by acceptance of its Notes, each Noteholder hereby acknowledges the terms of the Administration Agreement and agrees to cooperate with the Administrative Agent in its execution of its duties and responsibilities.

 

 

3

 



Section 105. General Interpretive Principles. For purposes of this Indenture (including Appendix A hereto) except as otherwise expressly provided or unless the context otherwise requires:

(a) the defined terms in this Indenture shall include the plural as well as the singular, and the use of any gender herein shall be deemed to include any other gender;

(b) references herein to “Articles”, “Sections”, “Subsections”, “paragraphs”, and other subdivisions without reference to a document are to designated Articles, Sections, Subsections, paragraphs and other subdivisions of this Indenture;

(c) a reference to a Subsection without further reference to a Section is a reference to such Subsection as contained in the same Section in which the reference appears, and this rule shall also apply to paragraphs and other subdivisions;

(d) the words “herein”, “hereof’, “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular provision;

(e) the term “include” or “including” shall mean without limitation by reason of enumeration; and

(f) When referring to Section 302 or Section 806 of this Indenture, the term “or” shall be additive and not exclusive.

Section 106. Statutory References. References in this Indenture to any section of the Uniform Commercial Code or the UCC shall mean, on or after the effective date of adoption of any revision to the Uniform Commercial Code or the UCC in the applicable jurisdiction, such revised or successor section thereto.

ARTICLE II

THE NOTES

Section 201. Authorization of Notes. (a) The number of Series or Classes of Notes which may be created by this Indenture is not limited; provided, however, that, the issuance of any Series of Notes shall not result in, or with the giving of notice or the passage of time or both would not result in, the occurrence of an Early Amortization Event or an Event of Default. The aggregate principal amount of Notes of each Series which may be issued, authenticated and delivered under this Indenture is not limited except as shall be set forth in any Supplement and as restricted by the provisions of this Indenture.

(b) The Notes issuable under this Indenture shall be issued in such Series, and such Class or Classes within a Series, as may from time to time be created by Supplement pursuant to this Indenture. Each Series shall be created by a different Supplement and shall be designated to differentiate the Notes of such Series from the Notes of any other Series. The Issuer intends that each such Note shall constitute a “security” within the meaning of Article 8 of the UCC.

(c) Upon satisfaction of and compliance with the requirements and conditions to Closing set forth in the related Supplement, Notes of the Series to be executed and delivered on a particular Series Issuance Date pursuant to such related Supplement, may be executed by the Issuer and delivered to the Indenture Trustee for authentication following the execution and delivery of the related

 

 

4

 



Supplement creating such Series or from time to time thereafter, and the Indenture Trustee shall authenticate and deliver Notes upon a request set forth in an Officer’s Certificate of the Issuer signed by one of its Authorized Signatories, without further action on the part of the Issuer.

Section 202. Form of Notes; Global Notes. (a) Notes of any Series or Class (other than Subject Notes) may be issued, authenticated and delivered, at the option of the Issuer, as Regulation S Global Notes, Rule 144A Global Notes, or as Definitive Notes or as may otherwise be set forth in a Supplement and shall be substantially in the form of the exhibits attached to the related Supplement. Notes of each Series shall be dated the date of their authentication and shall bear interest at such rate, be payable as to principal, premium, if any, and interest on such date or dates, and shall contain such other terms and provisions as shall be established in the related Supplement. Except as otherwise provided in any Supplement, the Notes shall be issued in minimum denominations of $15,000,000 and in integral multiples of $1,000,000 in excess thereof; provided that one Note of each Class may be issued in a nonstandard denomination. Notwithstanding any other provision of this Indenture or any Supplement thereto, Subject Notes shall only be issued in certificated form.

(b) If the Issuer shall choose to issue Regulation S Global Notes or Rule 144A Global Notes, such notes shall be issued in the form of one or more Regulation S Global Notes or one or more Rule 144A Global Notes which (i) shall represent, and shall be denominated in an aggregate amount equal to, the aggregate principal amount of all Notes to be issued under the related Supplement, (ii) shall be delivered as one or more Notes held by the Book-Entry Custodian, or, if appointed to hold such Notes as provided below, the Notes shall be registered in the name of the Depositary or its nominee, (iii) shall be substantially in the form of the exhibits attached to the related Supplement, with such changes therein as may be necessary to reflect that each such Note is a Global Note, and (iv) shall each bear a legend substantially to the effect included in the form of the exhibits attached to the related Supplement.

(c) Notwithstanding any other provisions of this Section 202 or of Section 205, unless and until a Global Note is exchanged in whole for Definitive Notes, a Global Note may be transferred, in whole, but not in part, and in the manner provided in this Section 202, only by (i) the Depositary to a nominee of such Depositary, or (ii) by a nominee of such Depositary to such Depositary or another nominee of such Depositary or (iii) by such Depositary or any such nominee to a successor Depositary selected or approved by the Issuer or to a nominee of such successor Depositary or in the manner specified in Section 202(d). The Depositary or the Issuer shall order the Note Registrar to authenticate and deliver any Global Notes and any Global Note for each Class of Notes having an aggregate initial outstanding principal balance equal to the initial outstanding balance of such Class. Noteholders shall hold their respective Ownership Interests in and to such Notes through the book-entry facilities of the Depositary. Without limiting the foregoing, any Noteholders shall hold their respective Ownership Interests, if any, in Global Notes only through Depositary Participants.

(d) If (i) the Issuer elects to issue Definitive Notes, (ii) the Depositary for the Notes represented by one or more Global Notes at any time notifies the Issuer that it is unwilling or unable to continue as Depositary of the Notes or if at any time the Depositary shall no longer be a clearing agency registered under the Exchange Act, and a successor Depositary is not appointed or approved by the Issuer within 90 days after the Issuer receives such notice or becomes aware of such condition, as the case may be, (iii) the Indenture Trustee, at the written direction of the Control Party for a Series, elects to terminate the book-entry system through the Depositary for such Series or (iv) after an Event of Default or a Manager Default, the Control Party for a Series notifies the Depositary or Book-Entry Custodian for such Series, as the case may be, in writing that the continuation of a book-entry system through the Depositary or the Book-Entry Custodian, as the case may be, is no longer in the best interest of the Noteholders of such Series, the Issuer will promptly execute, and the Indenture Trustee, upon receipt of an Officer’s Certificate evidencing such determination by the Issuer, will promptly authenticate and make available for delivery, Definitive Notes, in authorized denominations and in an aggregate principal amount equal to the

 

 

5

 



principal amount of one or more Global Notes so exchanged in exchange for such one or more Global Notes or as an original issuance of Notes and this Section 202(d) shall no longer be applicable to the Notes of such Series. Upon the exchange of the Global Notes for such Definitive Notes without coupons, in authorized denominations, such Global Notes shall be canceled by the Indenture Trustee. All Definitive Notes shall be issued without coupons. Such Definitive Notes issued in exchange of the Global Notes pursuant to this Section 202(d) shall be registered in such names and in such authorized denominations as the Depositary in the case of an exchange or the Note Registrar in the case of an original issuance, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Indenture Trustee. The Indenture Trustee may conclusively rely on any such instructions furnished by the Depositary or the Note Registrar, as the case may be, and shall not be liable for any delay in delivery of such instructions. The Indenture Trustee shall make such Notes available for delivery to the Persons in whose names such Notes are so registered.

(e) As long as the Notes Outstanding are represented by one or more Global Notes:

 

(1)

the Note Registrar and the Indenture Trustee may deal with the Depositary for all purposes (including the payment of principal of and interest on the Notes) as the authorized representative of the Note Owners;

 

(2)

the rights of Note Owners shall be exercised only through the Depositary and shall be limited to those established by law and agreements between such Note Owners and the Depositary or the Depositary Participants. Unless and until Definitive Notes are issued, the Depositary will make book-entry transfers among the Depositary Participants and receive and transmit payments of principal of, and interest on, the Notes to such Depositary Participants; and

 

(3)

whenever this Indenture requires or permits actions to be taken based upon instructions or directions of Noteholders evidencing a specified percentage of the voting rights of a particular Series, the Depositary shall be deemed to represent such percentage only to the extent that it has received instructions to such effect from Note Owners and/or Depositary Participants owning or representing, respectively, such required percentage of the beneficial interest in the Notes (or Class of Notes) and has delivered such instruction to the Indenture Trustee.

(f) Whenever a notice or other communication to the Noteholders is required under this Indenture, unless and until Definitive Notes have been issued to the Noteholders, the Indenture Trustee shall give all such notices and communications to the Depositary.

(g) The Indenture Trustee is hereby initially appointed as the Book-Entry Custodian and hereby agrees to act as such in accordance with the agreement that it has with the Depositary authorizing it to act as such. The Book-Entry Custodian may, and, if it is no longer qualified to act as such, the Book-Entry Custodian shall, appoint, by written instrument delivered to the Issuer and the Depositary, any other transfer agent (including the Depositary or any successor Depositary) to act as Book-Entry Custodian under such conditions as the predecessor Book-Entry Custodian and the Depositary or any successor Depositary may prescribe, provided that the predecessor Book-Entry Custodian shall not be relieved of any of its duties or responsibilities by reason of any such appointment of other than the Depositary. If the Indenture Trustee resigns or is removed in accordance with the terms hereof, the successor Indenture Trustee or, if it so elects, the Depositary shall immediately succeed to its predecessor’s duties as Book-Entry Custodian. The Issuer shall have the rights to inspect, and to obtain copies of, any Notes held as Global Notes by the Book-Entry Custodian.

 

 

6

 



(h) The provisions of Section 205(g) shall apply to all transfers of Definitive Notes, if any, issued in respect of Ownership Interests in the Rule 144A Global Notes.

Section 203. Execution; Recourse Obligation. The Notes shall be executed on behalf of the Issuer by an Authorized Signatory of the Issuer. The Notes shall be dated the date of their authentication by the Indenture Trustee.

In case any Authorized Signatory of the Issuer whose signature shall appear on the Notes shall cease to be an Authorized Signatory of the Issuer before the authentication by the Indenture Trustee and delivery of such Notes, such signature or facsimile signature shall nevertheless be valid and sufficient for all purposes.

All Notes and the interest and other amounts payable thereon shall be full recourse obligations of the Issuer and shall be secured by all of the Issuer’s right, title and interest in the Collateral. The Notes shall never constitute obligations of the Indenture Trustee, the Manager, the Seller or of any shareholder or any Affiliate of the Seller (other than the Issuer) or any member of the Issuer, or any officers, directors, employees or agents of any thereof, and no recourse may be had under or upon any obligation, covenant or agreement of this Indenture, any Supplement or of any Notes, or for any claim based thereon or otherwise in respect thereof, against any incorporator or against any past, present, or future owner, partner of an owner or any officer, employee or director thereof or of any successor entity, or any other Person, either directly or through the Issuer, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly agreed that this Indenture and the obligations issued hereunder are solely obligations of the Issuer, and that no such personal liability whatever shall attach to, or is or shall be incurred by, any other Person under or by reason of this Indenture, any Supplement or any Notes or implied therefrom, or for any claim based thereon or in respect thereof, all such liability and any and all such claims being hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of such Notes. Except as provided in any Supplement, no Person other than the Issuer shall be liable for any obligation of the Issuer under this Indenture or any Note or any losses incurred by any Noteholder.

Section 204. Certificate of Authentication. No Notes shall be secured hereby or entitled to the benefit hereof or shall be or become valid or obligatory for any purpose unless there shall be endorsed thereon a certificate of authentication by the Indenture Trustee, substantially in the form set forth in the form of Note attached to the related Supplement. Such certificate on any Note shall be conclusive evidence and the only competent evidence that the Note has been duly authenticated and delivered hereunder.

At the written direction of the Issuer, the Indenture Trustee shall authenticate and deliver the Notes. It shall not be necessary that the same signatory of the Indenture Trustee execute the certificate of authentication on each of the Notes.

Section 205. Registration; Registration of Transfer and Exchange of Notes.

(a) Initially, the Indenture Trustee shall keep at its Corporate Trust Office books for the registration and transfer of the Notes (the “Note Register”). The Issuer hereby appoints the Indenture Trustee as its registrar (the “Note Registrar”) and transfer agent to keep such books and make such registrations and transfers as are hereinafter set forth in this Section 205 and also authorizes and directs the Indenture Trustee to provide a copy of such registration record to each of the Administrative Agent and the Manager upon their request. The names and addresses of the Noteholders and all transfers of, and the names and addresses of the transferee of, all Notes will be registered in such Note Register. The Person in whose name any Note is so registered shall be deemed and treated as the owner and Noteholder thereof for all purposes of this Indenture, and none of the Indenture Trustee, any Series Enhancer, the

 

 

7

 



Note Registrar or the Issuer shall be affected by any notice or knowledge to the contrary. If a Person other than the Indenture Trustee is appointed by the Issuer to maintain the Note Register, the Issuer will give the Indenture Trustee and the Administrative Agent prompt written notice of such appointment and of the location, and any change in the location, of the successor Note Registrar, and the Indenture Trustee and any Series Enhancer shall have the right to inspect the Note Register at all reasonable times and to obtain copies thereof, and the Indenture Trustee shall have the right to conclusively rely upon a certificate executed on behalf of the Note Registrar by an officer thereof as to the names and addresses of the Noteholders and the principal amounts and number of such Notes.

(b) Payments of principal, premium, if any, and interest on any Note shall be payable on each Payment Date only to the Person that was the Noteholder thereof on the Record Date immediately preceding such Payment Date. The principal of, premium, if any, and interest on each Note shall be payable at the Corporate Trust Office of the Indenture Trustee in immediately available funds in such coin or currency of the United States of America as at the time for payment shall be legal tender for the payment of public and private debts.

(c) Notwithstanding the foregoing or any provision in any Note to the contrary, if so requested by the Noteholder by written notice (given at least ten (10) days prior to the applicable Payment Date) to the Indenture Trustee, all amounts payable to such Noteholder may be paid either (i) by crediting the amount to be distributed to such Noteholder to an account maintained by such Noteholder with the Indenture Trustee or by transferring such amount by wire to such other bank in the United States, including a Federal Reserve Bank, as shall have been specified in such notice, for credit to the account of such Noteholder maintained at such bank, or (ii) by mailing a check to such address as such Noteholder shall have specified in such notice, in either case without any presentment or surrender of such Note to the Indenture Trustee at the Corporate Trust Office of the Indenture Trustee.

(d) All payments on the Notes shall be paid to the Noteholders by wire transfer of immediately available funds for receipt prior to 2:00 p.m. (New York City time) on the related Payment Date. Any such payments received by the Noteholders after 2:00 p.m. (New York City time) on any day shall be considered to have been received on the next succeeding Business Day; provided, however, that if the Issuer has deposited the required funds with the Indenture Trustee by close of business one (1) Business Day prior to the Payment Date, then the Issuer shall be deemed to have made such payment at the time so required on such date. Notwithstanding the foregoing or any provision in any Note to the contrary, if so requested by the registered Noteholder by written notice to the Indenture Trustee, all amounts payable to such registered Noteholder may be paid by mailing a check to such address as such Noteholder shall have specified in such notice, in either case without any presentment or surrender of such Note to the Indenture Trustee at the Corporate Trust Office of the Indenture Trustee.

(e) Upon surrender for registration of transfer of any Note at the Corporate Trust Office, the Issuer shall execute and the Indenture Trustee, upon written request, shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Notes of the same Series and Class, of any authorized denominations and of alike aggregate original principal amount.

(f) All Notes issued upon any registration of transfer or exchange of Notes shall be the legal, valid and binding obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture and the relevant Supplement, as the Notes surrendered upon such registration of transfer or exchange.

(g) Every Note presented or surrendered for registration of transfer or for exchange shall be duly endorsed, or be accompanied by a written instrument of transfer, in form satisfactory to the Issuer and the Indenture Trustee duly executed, by the Noteholder thereof or his attorney duly authorized in writing.

 

 

8

 



(h) Any service charge, fees or expenses made or expense incurred by the Indenture Trustee for any such registration of transfer or exchange referred to in this Section 205 shall be paid by the applicable Noteholder. The Indenture Trustee or the Issuer may require payment by the applicable Noteholder of a sum sufficient to cover any tax, expense or other governmental charge payable in connection therewith.

(i) Unless otherwise specified in the related Supplement, no transfer of any Note or interest therein shall be made unless that transfer is made pursuant to an effective registration statement under the Securities Act, and effective registration or qualification under applicable state securities laws, or is made in a transaction that does not require such registration or qualification. If a transfer of any Definitive Note is to be made without registration under the Securities Act (other than in connection with the initial issuance thereof or a transfer thereof by the Depositary or one of its Affiliates), then the Note Registrar shall refuse to register such transfer unless it receives (and upon receipt, may conclusively rely upon) either: (i) an Investment Letter signed by such Noteholder and such Noteholder’s prospective transferee; or (ii) an Opinion of Counsel satisfactory to the Indenture Trustee and the Issuer to the effect that such transfer may be made without registration under the Securities Act (which Opinion of Counsel shall not be an expense of the Issuer or any Affiliate thereof or of the Depositary, the Manager, the Indenture Trustee, any Series Enhancer or the Note Registrar in their respective capacities as such), together with the written certification(s) as to the facts surrounding such transfer from the Noteholder desiring to effect such transfer or such Noteholder’s prospective transferee on which such Opinion of Counsel is based. If such a transfer of any interest in a Global Note is to be made without registration under the Securities Act, the transferor will be deemed to have made each of the representations and warranties set forth on Exhibit B hereto in respect of such interest as if it was evidenced by a Definitive Note and the transferee will be deemed to have made each of the representations and warranties set forth in either Exhibit B hereto in respect of such interest as if it was evidenced by a Definitive Note. None of the Depositary, the Issuer, the Indenture Trustee or the Note Registrar is obligated to register or qualify any Class of Notes under the Securities Act or any other securities law or to take any action not otherwise required under this Indenture to permit the transfer of any Note or interest therein without such registration or qualification. Any Noteholder or Note Owner desiring to effect such a transfer shall, and does hereby agree to, indemnify the Depositary, the Issuer, the Indenture Trustee and the Note Registrar against any liability that may result if any transfer made in accordance with the preceding sentence did in fact require registration under the Securities Act.

(j) If Notes are issued or exchanged in definitive form under Section 202, such Notes will not be registered by the Indenture Trustee unless each prospective initial Noteholder acquiring a Note, each prospective transferee acquiring a Note and each prospective owner (or transferee thereof) of a beneficial interest in Notes (each, a “Prospective Owner”) acquiring such beneficial interest provides the Manager, the Issuer, the Trustee and any successor Manager with a written representation to the effect set forth in either (A) with respect to any Warehouse Notes, the first sentence of Section 208 or (B) with respect to any Term Note, either subsection (i) or (ii) of the second sentence of Section 208.

(k) No sale, assignment or other transfer of a Note shall be effective or deemed effective if such sale, assignment or other transfer is to a Competitor. Neither the Indenture Trustee nor the Issuer is under any obligation to register the Notes under the Securities Act or any other securities law or to bear any expense with respect to such registration by any other Person or monitor compliance of any transfer with the securities laws of the United States regulations promulgated in connection thereto or ERISA.

(l) Any Note for which an Opinion of Counsel has not been rendered to the Issuer to the effect that such Note constitutes debt for United States federal income tax purposes (a “Subject Note”) shall be subject to the limitations of this Section 205(l). No Subject Notes may be transferred, and no transfer (or purported transfer) of all or any part of a Subject Note (or any direct or indirect economic or

 

 

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beneficial interest therein) (a “Transferred Note”) whether to another Noteholder or to a Person that is not a Noteholder (a “Transferee”), shall be effective, and to the greatest extent permitted under Applicable Law any such transfer (or purported transfer) shall be void ab initio, and no Person shall otherwise become a Holder of a Subject Note, unless: (i) the Transferee provides the Note Registrar with its representations and warranties made for the benefit of the Issuer to the effect that: (A) either (I) it is not and will not become for U.S. federal income tax purposes a partnership, Subchapter S corporation or grantor trust (each such entity a “flow-through entity”) or (II) if it is or becomes a flow-through entity, then (x) none of the direct or indirect beneficial owners of any of the interests in the Transferee have or ever will have all or substantially all the value of its interest in the Transferee attributable to the interest of the Transferee in any Transferred Note, any other Notes, other interest (direct or indirect) in the Issuer, or any interest created under this Indenture and (y) it is not and will not be a principal purpose of the arrangement involving the investment of the Transferee in any Transferred Note to permit any partnership to satisfy the 100 partner limitation of Section 1.7704-1(h)(1)(ii) of the Treasury Regulations necessary for such partnership not to be classified as a publicly traded partnership under the Code, (B) the Transferee will not sell, assign, transfer or otherwise convey any participating interest in any Note or any financial instrument or contract the value of which is determined by reference in whole or in part to any Note, (C) it is not acquiring and will not sell, transfer, assign, participate, pledge or otherwise dispose of any Transferred Note(s) (or interest therein) or cause any Transferred Note(s) (or interest therein) to be marketed on or through an “established securities market” within the meaning of Section 7704(b) of the Code, including, without limitation, an interdealer quotation system that regularly disseminates firm buy or sell quotations, and (D) in the case of Subject Notes other than the Series 2008-1 Notes that it is a “U.S. Person” within the meaning of Section 7701(a)(30) of the Code, and (ii) after such transfer there would be no more than 90 members of the limited liability company that is the Issuer (including as members, solely for purposes of this Section 205(l), Holders of any Subject Notes and any other instruments subject to the transfer restrictions of this Section 205(l)). The Issuer shall not recognize any prohibited Transfer described in this paragraph either (i) by redeeming the transferor’s interest, or (ii) by admitting the Transferee as such a member or otherwise recognizing any right of the Transferee (including, without limitation, any right of the Transferee to receive payments or other distributions from the Issuer, directly or indirectly).

Section 206. Mutilated Destroyed, Lost and Stolen Notes.

(a) If (i) any mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, and (ii) there is delivered to the Indenture Trustee such security or indemnity as it and the Issuer may require to hold the Issuer, the Manager and the Indenture Trustee harmless, then the Issuer shall execute and the Indenture Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Note, a replacement Note of the same Series and Class and maturity and of like terms as the mutilated, destroyed, lost or stolen Note; provided, however, that if any such destroyed, lost or stolen Note, but not a mutilated Note, shall have become, or within seven days shall be, due and payable, the Issuer may pay such destroyed, lost or stolen Note when so due or payable instead of issuing a replacement Note.

(b) If, after the delivery of such replacement Note, or payment of a destroyed, lost or stolen Note pursuant to the proviso to the preceding sentence, a protected purchaser (as defined in the UCC) of the original Note in lieu of which such replacement Note was issued (or such payment was made) presents for payment such original Note, the Issuer and the Indenture Trustee shall be entitled to recover upon the security or indemnity provided therefor to the extent of any and all loss, damage, cost or expense incurred by the Issuer or the Indenture Trustee in connection therewith.

 

 

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(c) The Indenture Trustee and the Issuer may, for each new Note authenticated and delivered under the provisions of this Section 206, require the advance payment by the Noteholder of the expenses, including counsel fees, service charges and any tax or governmental charge that may be incurred by the Indenture Trustee or the Issuer in connection therewith. Any Note issued under the provisions of this Section 206 in lieu of any Note alleged to be destroyed, mutilated, lost or stolen, shall be equally and proportionately entitled to the benefits of this Indenture with all other Notes of the same Series and Class. The provisions of this Section 206 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes.

Section 207. Delivery, Retention and Cancellation of Notes. Each Noteholder is required, and hereby agrees, to return to the Indenture Trustee or, if any Series Enhancer has made any unreimbursed payment on such Notes, to such Series Enhancer, such return to be completed within thirty (30) days after the receipt of such payment, any Note on which the final payment due thereon has been made. Any such Note as to which the Indenture Trustee has made or holds the final payment thereon shall be deemed canceled and unless any unreimbursed payment on such Note has been made by a Series Enhancer, shall no longer be Outstanding for any purpose of this Indenture, whether or not such Note is ever returned to the Indenture Trustee. Matured Notes delivered upon final payment to the Indenture Trustee and any Notes transferred or exchanged for other Notes shall be canceled and disposed of by the Indenture Trustee in accordance with its policy of disposal and the Indenture Trustee shall promptly deliver to the Issuer such canceled Notes. If the Indenture Trustee shall acquire, for its own account, any of the Notes, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Notes. If the Issuer shall acquire any of the Notes, such acquisition shall operate as a redemption or satisfaction of the indebtedness represented by such Notes. Notes which have been canceled by the Indenture Trustee shall be deemed paid and discharged for all purposes under this Indenture.

Section 208. ERISA Deemed Representations. Each prospective initial Noteholder and each Prospective Owner of a Warehouse Note will be deemed to have represented and warranted by such purchase that it is not acquiring the Warehouse Note with the plan assets of a Benefit Plan Investor. Each prospective initial Noteholder and each Prospective Owner of a Term Note will be deemed to have represented and warranted by such purchase that either (i) it is not acquiring the Term Notes with the plan assets of a Benefit Plan or any other plan that is subject to a law that is similar to Title I of ERISA or Section 4975 of the Code; or (ii) the acquisition, holding and disposition of the Term Note will not give rise to a nonexempt prohibited transaction under Section 406 of ERISA, Section 4975 of the Code or any similar applicable law.

ARTICLE III

PAYMENT OF NOTES; STATEMENTS TO NOTEHOLDERS

Section 301. Principal and Interest. Distributions of principal, premium, if any, and interest on any Series or Class of Notes shall be made to Noteholders of each Series and Class as set forth in Section 302 of this Indenture and in the related Supplement. Additional interest calculated at the Default Rate shall be payable with respect to any payment of principal and/or interest on any Note which is not paid when due. The maximum Default Rate for any Note of any Series shall be equal to the sum of (i) two percent (2%) per annum, plus (ii) the interest rate for such Note immediately prior to the occurrence of the relevant Event of Default. If interest or principal amounts owing on Notes are paid by a Series Enhancer and additional interest at the Default Rate otherwise would be owing to the Noteholders of such Notes, then the Default Rate shall be owed to such Series Enhancer and shall not be paid to applicable Noteholders of such Series unless the related Series Enhancer has failed to make payment of such amounts in accordance with the terms of any applicable Enhancement Agreement. Except as set

 

 

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forth in any Supplement, all interest payable on the Notes and all commitment and other fees payable to the Noteholders shall be computed on the basis of a 360-day year for the actual number of days which have elapsed in the relevant calculation period.

Section 302. Trust Account. (a) The Issuer shall establish and maintain so long as any Outstanding Obligation remains unpaid the Trust Account into which the Issuer shall deposit (or cause to be deposited) all of the following amounts: (i) all amounts representing Estimated Net Operating Income (and adjustments thereof), Casualty Proceeds and Sales Proceeds with respect to the Managed Containers received from the Manager pursuant to the terms of the Management Agreement, (ii) all Manager Advances, (iii) all amounts received by the Issuer pursuant to the terms of all Hedge Agreements then in effect, and (iv) other payments specified to be deposited therein pursuant to the terms of this Indenture and the other Transaction Documents. Such Trust Account shall initially be established and maintained with the Corporate Trust Office of the Indenture Trustee in trust for the Indenture Trustee, on behalf of the Noteholders, each Hedge Counterparty and each Series Enhancer, until all Outstanding Obligations are paid in full. The Trust Account shall at all times be an Eligible Account, shall be in the name of the Issuer and shall be pledged to the Indenture Trustee pursuant to the terms of this Indenture. The Issuer shall not establish any additional Trust Accounts without (in each instance) prior written notice to the Indenture Trustee and each Series Enhancer, if any.

(b) The Issuer shall cause the Manager to deposit into the Trust Account in accordance with the provisions of Section 5.1 and 5.2 of the Management Agreement amounts representing the Estimated Net Operating Income (and adjustments thereof), Casualty Proceeds and Sales Proceeds with respect to the Managed Containers. The Manager shall be permitted to require the Indenture Trustee to withdraw from amounts on deposit in the Trust Account on each Payment Date, or otherwise net out from amounts otherwise required to be deposited by the Manager in the Trust Account in accordance with the provisions of Section 5.1 and 5.2 of the Management Agreement, the amount of any Management Fees or Management Fee Arrearage that would otherwise be due and payable on the immediately succeeding Payment Date.

(c) On or prior to each Determination Date, the Issuer shall cause the Manager, pursuant to Section 4.1.2 of the Management Agreement, to prepare and deliver the Manager Report. On each Payment Date, the Indenture Trustee, based on the Manager Report and in accordance with the terms of this Indenture and each Supplement, shall distribute from the Trust Account an amount equal to the sum of (i) all amounts representing the Net Operating Income of the Eligible Containers received during the related Collection Period, (ii) all other amounts received by the Issuer subsequent to the immediately preceding Payment Date, (iii) all amounts transferred from the Restricted Cash Account in accordance with the provisions of Section 306 hereof; provided that the amounts described in this clause (iii) may be used only to make the payments described in Section 306 hereof, (iv) any earnings on Eligible Investments in the Trust Account, the Restricted Cash Account and any Series Accounts, (v) all Manager Advances made by the Manager in accordance with the terms of the Management Agreement subsequent to the immediately preceding Payment Date, (vi) the net amount received by the Issuer pursuant to any Hedge Agreement then in effect and (vii) if so directed by the Issuer, amounts, proceeds and funds contemplated by Section 302(f) (unless the Issuer directs otherwise, the amounts and proceeds contemplated by this clause (vii) shall be applied only in respect of principal on Notes of one or more Series) (the sum of the amounts described in clauses (i) through (vii) collectively, the “Available Distribution Amount”), to the following Persons, by wire transfer of immediately available funds, in the order of priority listed below (in the absence of any Manager Report, the Indenture Trustee shall distribute the Available Distribution Amount in accordance with written instructions from the Administrative Agent (with a copy to the Issuer, each Series Enhancer and each Hedge Counterparty) and shall hold until delivery of the Manager Report (i) any funds otherwise payable due to the Issuer and (ii) any other amounts which the Administrative Agent is unable to ascertain or allocate to a specific payment priority set forth in this Indenture):

 

 

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(I)

If no Early Amortization Event or Event of Default shall have occurred and shall then be continuing:

 

(1)

To the Indenture Trustee, all the Indenture Trustee’s Fees then due and payable for all Series then Outstanding (subject to the per annum dollar limitation in Section 905);

 

(2)

To the Administrative Agent, the Administrative Agent Fees then due and payable;

 

(3)

To the Manager, an amount equal to the sum of: (i) the Management Fee then due and payable, (ii) the amount of any Management Fee Arrearage, and (iii) any Excess Deposit then due and payable, but in each case only to the extent not previously withheld by the Manager in accordance with the terms of the Transaction Documents;

 

(4)

To the Manager, reimbursement for any Manager Advances;

 

(5)

To the Persons entitled thereto: (i) any auditing, accounting and related fees then due and payable which are classified as an Issuer Expense and (ii) any other Issuer Expenses then due and payable, so long as the aggregate amount paid pursuant to this clause (5) in any calendar year would not exceed Five Hundred Thousand Dollars ($500,000);

 

(6)

To each Series Enhancer, pro rata based on the amount of Premiums then due and payable, the amount of any Premium then due and payable pursuant to the terms of each applicable Enhancement Agreement;

 

(7)

To each of the following on a pro rata basis: (i) to each Series Account for each Series of Notes then Outstanding, an amount equal to the Priority Payments for each such Series and (ii) to each Hedge Counterparty, the amount of any scheduled payments (but excluding termination payments) then due and payable pursuant to the terms of any Hedge Agreement then in effect. If sufficient funds do not exist to pay in full all such Priority Payments, such amounts shall be allocated among all Series of Notes in the same proportion as the ratio of (x) the Priority Payments of a particular Series of Notes then Outstanding on such Payment Date to (y) the sum of the Priority Payments for all Series of Notes then Outstanding on such Payment Date;

 

(8)

To the Restricted Cash Account (if such account has been opened), an amount sufficient so that the total amount on deposit therein, is equal to the Restricted Cash Amount for such Payment Date;

 

(9)

To each Series Account for each Series of Notes then Outstanding in accordance with the provisions of Section 302(d), all Minimum Principal Payment Amounts for each such Series;

 

(10)

To each Series Account for each Series of Notes then Outstanding in accordance with the provisions of Section 302(d), all Scheduled Principal Payment Amounts for each such Series;

 

 

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(11)

To each Series Account for each Series of Notes then Outstanding, an amount equal to the Supplemental Principal Payment Amounts for each Series (subject to the terms of Section 702(a));

 

(12)

To each of the following on a pro rata basis: (i) to each Hedge Counterparty, on a pro rata basis, the amount of any unpaid payments then due and payable (including termination payments but excluding (x) any payments made pursuant to clause (7) above and (y) termination payments resulting from the breach of the applicable Hedge Agreement by such Hedge Counterparty) pursuant to the terms of any Hedge Agreement then in effect, (ii) to the Noteholders and any Series Enhancer, interest payments on the Notes not paid pursuant to clause (7) above and any Indemnity Amounts or other amounts then due and payable and (iii) to the Indenture Trustee, any Indenture Trustee’s Fees then due and payable, after giving effect to the payment made pursuant to clause (1) above but not subject to the per annum dollar limitation in Section 905;

 

(13)

To each Hedge Counterparty, on a pro rata basis, the amount of any unpaid payments then due and payable (including termination payments resulting from the breach of the applicable Hedge Agreement by such Hedge Counterparty but excluding any payments made pursuant to clause (7) or (12) above) pursuant to the terms of any Hedge Agreement then in effect;

 

(14)

To each of the following on a pro rata basis: (i) to the Issuer, the amount of any indemnity payments payable to the officers, directors and/or managers of the Issuer required to be made by the Issuer, and (ii) to the Manager, the amount of any officer and director indemnity payments required to be made by the Manager;

 

(15)

To the Issuer, any remaining Available Distribution Amount which may be used by the Issuer for any purpose, including, without limitation, general corporate purposes, the distribution of dividends, repayment of debt (including reimbursement of amounts owing to the Guarantor (as defined in the Series 2008-1 Supplement), paying fees and expenses or any other purpose in the sole discretion of the Issuer.

(II)

If an Early Amortization Event shall then be continuing, but no Event of Default shall then be continuing (or an Event of Default has occurred but the Notes have not been accelerated in accordance with Section 802 hereof):

 

(1)

To the Indenture Trustee, all the Indenture Trustee’s Fees then due and payable for all Series then Outstanding (subject to the per annum dollar limitation in Section 905);

 

(2)

To the Administrative Agent, the Administrative Agent Fees then due and payable;

 

(3)

To the Manager, an amount equal to the sum of: (i) the Management Fee then due and payable, (ii) the amount of any Management Fee Arrearage, and (iii) any Excess Deposit then due and payable, but in each case only to the extent not previously withheld by the Manager in accordance with the terms of the Transaction Documents;

 

 

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(4)

To the Manager, reimbursement for any Manager Advances;

 

(5)

To the Persons entitled thereto: (i) any auditing, accounting and related fees then due and payable which are classified as an Issuer Expense and (ii) any other Issuer Expenses, so long as the aggregate amount paid pursuant to this clause (5) in any calendar year would not exceed Five Hundred Thousand Dollars ($500,000);

 

(6)

To each Series Enhancer, pro rata based on the amount of Premiums then due and payable, the amount of any Premium then due and payable pursuant to the terms of each applicable Enhancement Agreement;

 

(7)

To each of the following on a pro rata basis: (i) to each Series Account for each Series of Notes then Outstanding, an amount equal to the Priority Payments (including reimbursements and interest thereon payable to any related Series Enhancer) for each such Series and (ii) to each Hedge Counterparty, the amount of any scheduled payments (but excluding termination payments) then due and payable pursuant to the terms of any Hedge Agreement then in effect. If sufficient funds do not exist to pay in full all such Priority Payments, such amounts shall be allocated among all Series of Notes in the same proportion as the ratio of (x) the Priority Payments of a particular Series of Notes then Outstanding on such Payment Date to (y) the sum of the Priority Payments for all Series of Notes then outstanding on such Payment Date;

 

(8)

To the Restricted Cash Account (if such account has been opened), an amount sufficient so that the total amount on deposit therein is equal to the Restricted Cash Amount for such Payment Date;

 

(9)

To each Series Account for each Series of Notes then Outstanding in accordance with the provisions of Section 302(d), all Minimum Principal Payment Amounts for each such Series;

 

(10)

To each Series Account for each Series of Notes then Outstanding in accordance with the provisions of Section 302(d), all Scheduled Principal Payment Amounts for each such Series;

 

(11)

To each Series of Notes then Outstanding, pro rata based on unpaid principal amounts, until all Series of Notes have been paid in full;

 

(12)

To each of the following on a pro rata basis: (i) to each Hedge Counterparty, on a pro rata basis, the amount of any other unpaid amounts owing by the Issuer (including termination payments but excluding (x) any payments made pursuant to clause (7) above and (y) termination payments resulting from the breach of the applicable Hedge Agreement by such Hedge Counterparty) then due and payable pursuant to the terms of any Hedge Agreement then in effect, (ii) to the Indenture Trustee’s Fees then due and payable, after giving effect to the payment made pursuant to clause (1) above but not subject to the per annum dollar limitation in Section 905, and (iii) to each Series Account, the following amounts: (A) for each Series of Notes then Outstanding, an amount equal to any increased costs, funding costs, breakage costs, taxes, other indemnification payments and any other unpaid Reimbursement Amount then due and owing to the related Series Enhancer pursuant to the terms of the related Enhancement Agreement and the

 

 

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Transaction Documents for such Series pro rata based on such amounts due for such Series of Notes then Outstanding, and (B) an amount equal to any Default Fee or any other amounts then due and owing to the Noteholders pursuant to the terms of the related Supplement, plus indemnity payments, increased costs and taxes pro rata based on such amounts due for such Series of Notes then Outstanding;

 

(13)

To each Hedge Counterparty, on a pro rata basis, the amount of any unpaid payments then due and payable (including termination payments resulting from the breach of the applicable Hedge Agreement by such Hedge Counterparty but excluding any payments made pursuant to clause (7) or (12) above) pursuant to the terms of any Hedge Agreement then in effect;

 

(14)

To each of the following on a pro rata basis: (i) to the Issuer, the amount of any indemnity payments payable to the officers, directors and/or managers of the Issuer required to be made by the Issuer and (ii) to the Manager, the amount of any officer or director indemnity payments required to be made by the Manager; and

 

(15)

To the Issuer, any remaining Available Distribution Amount which may be used by the Issuer for any purpose, including, without limitation, general corporate purposes, the distribution of dividends, repayment of debt (including reimbursement of amounts owing to the Guarantor (as defined in the Series 2008-1 Supplement), paying fees and expenses or any other purpose in the sole discretion of the Issuer.

(d) If on any Payment Date described in section (c)(I) above, there are not sufficient funds to pay, in full, the Minimum Principal Payment Amounts and/or Scheduled Principal Payment Amounts owing to all Series of Notes then Outstanding, as the case may be, then, subject to the priority of payments set forth in (c)(I) above, any such principal payments having the same payment priority will be paid, in full, to the Series first issued (based on their respective dates of issuance or Conversion Dates, as applicable) in chronological order based on their respective dates of issuance or Conversion Dates, as applicable. For purposes of this Section 302(d) only, any Series which was originally designated as Warehouse Notes and is subsequently considered to be a Series of Term Notes due to the occurrence of the Conversion Date for such Series will be deemed to have an issuance date equivalent to its Conversion Date. If two or more Series of the Notes were issued on the same date or have the same Conversion Date, then principal payments having the same payment priority will be allocated among each such Series, on a pro rata basis, based on the principal payments then due with respect to such Series.

If on any Payment Date described in section (c)(II) above, there are not sufficient funds to pay, in full, all Minimum Principal Payment Amounts owing to all Series of Notes then Outstanding, then amounts available for the payment of Minimum Principal Payment Amounts pursuant to the priority of payments set forth in (c)(II) above shall be allocated among all Series of Notes for which Minimum Principal Payment Amounts are owing on such Payment Date on a pro rata basis, calculated based on the amount of the Minimum Principal Payment Amounts then owing to each such Series.

If on any Payment Date described in section (c)(II) above, there are not sufficient funds to pay, in full, all Scheduled Principal Payment Amounts owing to all Series of Notes then Outstanding, then amounts available for the payment of Scheduled Principal Payment Amounts pursuant to the priority of payments set forth in (c)(II) above shall be allocated among all Series of Notes for which Scheduled Principal Payment Amounts are owing on such Payment Date on a pro rata basis, calculated based on the amount of the Scheduled Principal Payment Amounts then owing to each such Series.

 

 

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(e) If any Series has more than one Class of Notes then Outstanding, then the Available Distribution Amount shall be calculated without regard to the payment priorities of the Classes of Notes within such Series. Once the Available Distribution Amount has been allocated to each Series, then that portion of the Available Distribution Amount allocable to such Series shall be paid to each Class of Noteholders of such Series in accordance with the priority of payments set forth in the related Supplement.

(f) The Issuer shall have the right, but not the obligation, to make (or to direct the Indenture Trustee to make) principal payments on any Series of Notes and payments of other Outstanding Obligations from some or all of (i) amounts that are payable or have been paid to the Issuer pursuant to this Section 302, (ii) amounts that the Issuer receives from advances or draws under any Series of Warehouse Notes, (iii) proceeds of the issuance of any Series of Notes, and (iv) other funds held by the Issuer. Without limiting the foregoing, at the direction of the Issuer, amounts and proceeds contemplated by the preceding sentence may be included in distributions in respect of principal payments on the Notes of one or more Series and payments of other Outstanding Obligations pursuant to Section 302(c).

(g) Notwithstanding anything in this Section 302 to the contrary, the payments provided for in Sections 302(c)(I)(14) and 302(c)(II)(14) shall not be made with respect to any officer or director if a final, non-appealable judgment has been entered to the effect that such officer or director is not entitled to indemnity pursuant to the terms of the applicable organizational documents or applicable law.

Section 303. Investment of Monies Held in the Trust Account, the Restricted Cash Account, and Series Accounts; Control over Eligible Investments.

(a) The Indenture Trustee shall invest any cash deposited in the Trust Account, the Restricted Cash Account, and each Series Account in such Eligible Investments as the Issuer shall direct in writing or by telephone and subsequently confirm in writing. Each Eligible Investment (including reinvestment of the income and proceeds of Eligible Investments) shall be held to its maturity and shall mature or shall be payable on demand not later than the Business Day immediately preceding the next succeeding Payment Date. If the Indenture Trustee has not received written instructions from the Issuer by 2:30 p.m. (New York time) on the day such funds are received as to the investment of funds then on deposit in any of the aforementioned accounts, the Issuer hereby instructs the Indenture Trustee to invest such funds in overnight investments of the type described in clause (iv) of the definition of Eligible Investments. Any funds in the Trust Account, the Restricted Cash Account, and each Series Account not so invested must be fully insured by the Federal Deposit Insurance Corporation. Eligible Investments shall be made in the name of the Securities Intermediary, and subject to the terms of the Control Agreements. Any earnings on Eligible Investments in the Trust Account, the Restricted Cash Account, and each Series Account shall be retained in each such account and be distributed in accordance with the terms of this Indenture or any related Supplement. The Indenture Trustee shall not be liable or responsible for losses on any investments made by it pursuant to this Section 303.

(b) On or prior to the Closing Date (with respect to the Trust Account and any Series Account) or on or prior to the Restricted Cash Effective Date (with respect to the Restricted Cash Account), each of the Issuer and the Securities Intermediary shall enter into control agreements (each a “Control Agreement”, collectively, the “Control Agreements”) substantially in the form of Exhibit C hereto for each of the Trust Account, the Restricted Cash Account and any Series Accounts. At all times on and after the Closing Date (or the related Closing Date or on Restricted Cash Effective Date, as applicable), each such account shall be the subject of a Control Agreement.

 

 

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(c) The Indenture Trustee, acting in accordance with the terms of this Indenture, shall be entitled to deliver an Entitlement Order to the Securities Intermediary at which such accounts are maintained at any time; provided, however, that the Indenture Trustee agrees not to invoke its right to provide an Entitlement Order (other than an order directing the transfer of funds from the Trust Account in accordance with Section 302(c)) from the Restricted Cash Account in accordance with Section 306 unless an Event of Default has occurred and is continuing. Such Control Agreements shall provide that upon receipt of the Entitlement Order in accordance with the provisions of this Indenture, the Indenture Trustee shall comply with such Entitlement Order without further consent by the Issuer or any other Person.

(d) Each of the Trust Account, the Restricted Cash Account, and the Series Accounts shall be initially established with the Indenture Trustee and, so long as any Outstanding Obligation remains unpaid, shall be maintained with the Indenture Trustee so long as (A) the short-term unsecured debt obligations of the financial institution fulfilling the role of the Indenture Trustee are rated not less than the Required Deposit Rating or (B) each of the Trust Account, the Restricted Cash Account, and the Series Accounts are maintained at the Corporate Trust Office of the Indenture Trustee. If any of the Trust Account, the Restricted Cash Account or the Series Accounts are not maintained at the Corporate Trust Office of the Indenture Trustee or if the short-term unsecured debt obligations of the Indenture Trustee fall below the Required Deposit Rating, then the Issuer shall within 10 Business Days after obtaining knowledge of such condition and, with the Indenture Trustee’s assistance as necessary, cause each of the Trust Account, the Restricted Cash Account and the Series Accounts to be transferred to either (A) an Eligible Institution which then maintains the Required Deposit Rating and is otherwise acceptable to the Administrative Agent and each Series Enhancer, if any, or (B) with the prior written consent of the Administrative Agent and each Series Enhancer, if any, the Corporate Trust Office of the successor Indenture Trustee. If any of the Trust Account, the Restricted Cash Account or any Series Account is maintained with a Person other than the Indenture Trustee or, if a Person other than the Indenture Trustee shall be the Securities Intermediary, the Issuer shall obtain the prior written consent of the Administrative Agent and each Series Enhancer, if any, and shall cause a new Control Agreement to be entered into with such Person.

(e) Each of the Trust Account, the Restricted Cash Account and each Series Account shall be governed by the laws of the State of New York, regardless of any provision in any other agreement. Each Control Agreement shall provide for purposes of the UCC, that New York shall be deemed to be the Securities Intermediary’s jurisdiction and each of the Trust Account, the Restricted Cash Account and each Series Account (as well as the Securities Entitlements related thereto) shall be governed by the laws of the State of New York.

(f) The Securities Intermediary has not entered into, and until the termination of this Indenture will not enter into, any agreement with any other Person relating to each of the Trust Account, the Restricted Cash Account, each Series Account or any Financial Assets credited thereto pursuant to which it has agreed to comply with Entitlement Orders of such other Person and the Securities Intermediary has not entered into, and until the termination of this Agreement will not enter into, any agreement with the Issuer, the Seller, the Manager or the Indenture Trustee purporting to limit or condition the obligation of the Securities Intermediary to comply with Entitlement Orders as set forth in Section 303(c) hereof.

(g) Except for the claims and interest of the Indenture Trustee and of the Issuer hereunder in each of the Trust Account, the Restricted Cash Account and each Series Account, to the best of its knowledge without independent investigation, the Securities Intermediary knows of no claim to, or interest in, any of the Trust Account, the Restricted Cash Account, any Series Account or in any Financial Asset credited thereto. If any other Person asserts any Lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against any of the Trust Account, the Restricted Cash Account, each Series Account or in any Financial Asset credited thereto, the Securities Intermediary will promptly notify the Indenture Trustee, the Manager, each Series Enhancer, each Hedge Counterparty and the Issuer thereof.

 

 

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(h) The Indenture Trustee shall possess a perfected security interest in all right, title and interest in and to all funds on deposit from time to time in each of the Trust Account, the Restricted Cash Account, each Series Account and in all Proceeds thereof. Each of the Trust Account, the Restricted Cash Account and each Series Account shall be in the name of the Issuer subject to a securities account control agreement providing that such account shall be under the sole dominion and control of the Indenture Trustee (subject to the terms and conditions thereof), for the benefit of the Noteholders, each Hedge Counterparty and each Series Enhancer, if any. The Indenture Trustee shall make withdrawals and payments from each of the Trust Account, the Restricted Cash Account and the Series Accounts and apply such amounts in accordance with the provisions of the Manager Report and, in the absence of any Manager Report, in accordance with written instructions from the Administrative Agent.

(i) The Issuer shall not direct the Indenture Trustee to make any investment of any funds or to sell any investment held in any of the Trust Account, the Restricted Cash Account or any Series Account unless the security interest of the Indenture Trustee in such account and any funds or investments held therein shall continue to be perfected without any further action by any Person.

(j) U.S. Bank National Association (including in its capacity as Securities Intermediary) hereby agrees that any security interest it may have in the Trust Account, the Restricted Cash Account and any Series Account or any Security Entitlement credited thereto shall be subordinate to the security interest created by this Indenture. The Financial Assets and other items deposited to the Trust Account, the Restricted Cash Account and any Series Account will not be subject to deduction, set-off, banker’s lien, or any other right in favor of any Person except as created pursuant to this Indenture. For the sake of clarity, the fees and expenses of the Indenture Trustee shall be payable solely pursuant to Section 302 or 806 of this Indenture and will not be subject to deduction, set-off, bankers lien or other right of the Indenture Trustee.

Section 304. Reports to Noteholders. The Indenture Trustee shall promptly upon the receipt thereof, make available to each Noteholder, the Administrative Agent, the Depositary, each Hedge Counterparty and each Series Enhancer, a copy of all reports, financial statements and notices received by the Indenture Trustee pursuant to the Contribution and Sale Agreement, the Indenture (including any Supplements issued pursuant thereto), the Administration Agreement, a Note Purchase Agreement or the Management Agreement, by posting copies thereof on its password-protected website (www.usbank.com/abs) and shall notify the Administrative Agent, each Noteholder, each Hedge Counterparty, and each Series Enhancer by e-mail when such notices or reports are available; provided that any reports, financial statements and notices received by the Indenture Trustee pursuant to a Supplement or a Note Purchase Agreement shall be delivered by the Indenture Trustee only to the Noteholders and the Series Enhancer of the related Series.

Section 305. Records. The Indenture Trustee shall cause to be kept and maintained customary records pertaining to the Trust Account, the Restricted Cash Account and each Series Account and all receipts and disbursements therefrom. The Indenture Trustee shall deliver monthly an accounting thereof in the form of a trust statement to the Issuer, the Seller, the Administrative Agent and the Manager, each Series Enhancer and each Hedge Counterparty.

Section 306. Restricted Cash Account. (a) The Issuer shall establish on or prior to the Restricted Cash Effective Date, and shall thereafter maintain so long as any Outstanding Obligation remains unpaid, an Eligible Account in the name of the Issuer with the Indenture Trustee which shall be designated as the Restricted Cash Account, which account shall be held by the Indenture Trustee for the benefit of the Noteholders of all Series of Notes and each Series Enhancer pursuant to the terms of this

 

 

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Indenture and the related Supplements. On the Restricted Cash Effective Date, the Issuer will deposit (or cause to be deposited) into the Restricted Cash Account an amount equal to the Restricted Cash Amount, and amounts thereafter shall be deposited in the Restricted Cash Account in accordance with Section 302 hereof. The Restricted Cash Account shall only be relocated to another financial institution in accordance with the express provisions of Section 303(d) hereof. Any and all monies on deposit in the Restricted Cash Account shall be invested in Eligible Investments in accordance with this Indenture and shall be distributed in accordance with this Section 306.

(b) On each Determination Date following the Restricted Cash Effective Date, the Indenture Trustee shall, in accordance with the Manager Report (or, in the absence of any Manager Report, in accordance with written instructions from the Administrative Agent), withdraw from the Restricted Cash Account and deposit into the Series Account for each Series an amount equal to the Deficiency Amount (determined after giving effect to all other deposits to the Series Account for such Series (other than funds transferred from the Restricted Cash Account)) on or prior to such Determination Date. Amounts transferred to the Series Account pursuant to the provisions of this Section 306(b) may only be used to pay amounts specified in the definition of “Permitted Payment Date Withdrawals”. If the amount on deposit in the Restricted Cash Account on a Determination Date is not sufficient to pay in full the aggregate Permitted Payment Date Withdrawals referred to in this Section 306(b), then the amount of funds then available in the Restricted Cash Account will be allocated among the various Series on a pro rata basis in proportion to the amount of their respective Permitted Payment Date Withdrawals.

(c) On each Payment Date following the Restricted Cash Effective Date, the Indenture Trustee shall, in accordance with the Manager Report (or, in the absence of any Manager Report, in accordance with written instructions from the Administrative Agent), deposit in the Trust Account for distribution in accordance with the terms of this Indenture the excess, if any, of (A) the amounts then on deposit in the Restricted Cash Account (after giving effect to any withdrawals therefrom on such Payment Date) over (B) an amount equal to the Restricted Cash Amount for such Payment Date. On the Legal Final Maturity Date for the Series with the latest Legal Final Maturity Date, any remaining funds in the Restricted Cash Account shall be deposited in the Trust Account and, subject to the limitations set forth in the related Supplement, distributed in accordance with Section 302 of this Indenture and the related Supplement.

Section 307. CUSIP Numbers. The Issuer in issuing the Notes may use “CUSIP” numbers (if then generally in use), and, if so, the Indenture Trustee shall use “CUSIP” numbers in notices of redemption as a convenience to Noteholders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Issuer will promptly notify the Indenture Trustee of any change in the “CUSIP” numbers.

Section 308. No Claim. Indemnities payable to the Indenture Trustee, the Manager, the Independent Director Provider, the Administrative Agent and any other Person, shall be non-recourse to the Issuer and shall not constitute a claim (as defined in Section 101(5) of the Bankruptcy Code) against the Issuer or the Collateral in the event such amounts are not paid in accordance with Section 302 or 806 of this Indenture.

Section 309. Compliance with Withholding Requirements. Notwithstanding any other provision of this Indenture, the Indenture Trustee shall comply with all United States federal income tax withholding requirements with respect to payments to Noteholders of interest, original issue discount, or other amounts that the Indenture Trustee reasonably believes are applicable under the Code. The consent of Noteholders shall not be required for any such withholding.

 

 

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Section 310. Tax Treatment of Notes. The Issuer has entered into this Indenture, and the Notes will be issued, with the intention that, for United States federal, state and local income, single business and franchise tax purposes, the Notes will qualify as indebtedness. The Issuer and the Indenture Trustee, by entering into this Indenture, and each Noteholder and beneficial owner of a Note, by its acceptance of its Note, agree to treat the Notes as indebtedness for United States federal, state and local income, single business and franchise tax purposes.

ARTICLE IV

COLLATERAL

Section 401. Collateral. (a) The Notes and all other Outstanding Obligations shall be obligations of the Issuer as provided in Section 203 hereof. The Indenture Trustee, on behalf of the Noteholders, each Hedge Counterparty and each Series Enhancer, if any, shall also have the benefit of, and the Outstanding Obligations shall be secured by and be payable from, the Issuer’s right, title and interest in the Collateral. The income, payments and proceeds of such Collateral shall be allocated to each such Person strictly in accordance with the applicable payment priorities set forth in Section 302 or Section 806 hereof.

(b) Notwithstanding anything contained in this Indenture to the contrary, the Issuer expressly agrees that it shall remain liable under each of its Contracts and Leases to observe and perform all the conditions and obligations to be observed and performed by it thereunder and that it shall perform all of its duties and obligations thereunder, all in accordance with and pursuant to the terms and provisions of each such Contract or Lease, as the case may be.

(c) The Indenture Trustee hereby acknowledges the appointment by the Issuer of the Manager to service and administer the Collateral in accordance with the provisions of the Management Agreement. So long as the Management Agreement shall not have been terminated in accordance with its terms, the Indenture Trustee hereby agrees to provide the Manager with such documentation, and to take all such actions with respect to the Collateral as the Manager may reasonably request in accordance with the express provisions of the Management Agreement; provided, however, that the Indenture Trustee shall be entitled to receive from the Manager reasonable compensation and cost reimbursement for any such action. Until such time as the Management Agreement has been terminated in accordance with its terms, the Manager, on behalf of the Issuer, shall continue to collect all Accounts and payments on the Leases of the Managed Containers in accordance with the provisions of the Management Agreement and deposit such amounts into the Trust Account in accordance with the provisions of the Management Agreement. Any Proceeds received directly by the Issuer in payment of any Account or Leases with respect to, or in payment for or in respect of, any of the Managed Containers or on account of any of the Contracts to which the Issuer is a party shall be promptly deposited by the Issuer in precisely the form received (with all necessary endorsements) in the Trust Account in accordance with the provisions of the Management Agreement, and until so deposited shall be deemed to be held in trust by the Issuer for the Indenture Trustee and shall continue to be collateral security for all of the obligations secured by this Indenture and shall not constitute payment thereof until applied as hereinafter provided. If (i) an Event of Default has occurred, (ii) any Sale of the Collateral pursuant to Section 816 hereof shall have occurred or (iii) a Manager Default has occurred, the Issuer shall at the request of the Indenture Trustee, acting with the consent of or at the direction of the Requisite Global Majority, to the extent practicable, deliver to the Indenture Trustee (or such other Person as the Indenture Trustee may direct) originals (or, to the extent originals cannot be delivered, copies) of all Leases and other documents evidencing, and relating to, the sale, lease and delivery of such Managed Containers and the Issuer shall, to the extent practicable, deliver originals (or, to the extent originals cannot be delivered, copies) of all other documents evidencing and relating to, the performance of any labor, maintenance, remarketing or other service which created any Accounts, including, without limitation, all original orders, invoices and shipping receipts.

 

 

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Section 402. Pro Rata Interest.

(a) Except as expressly provided for herein or in any Supplement, the Notes of all Outstanding Series shall be equally and ratably entitled to the benefits of this Indenture without preference, priority or distinction, all in accordance with the terms and provisions of this Indenture and the related Supplement. All Notes of a particular Class issued hereunder are and are to be, to the extent (including any exceptions) provided in this Indenture and the related Supplement, equally and ratably secured by this Indenture without preference, priority or distinction on account of the actual time or times of the authentication or delivery of the Notes so that all Notes of a particular Series and Class at any time Outstanding (including Notes owned by the Seller and its Affiliates, other than the Issuer) shall have the same right, Lien and preference under this Indenture and shall all be equally and ratably secured hereby with like effect as if they had all been executed, authenticated and delivered simultaneously on the date hereof.

(b) If the conditions specified in Section 701 of this Indenture are met with respect to such Series of Notes, the security interest, and all other estate and rights granted by this Indenture with respect to such Series of Notes shall cease and become null and void, and all of the property, rights, and interest granted as security for the Notes of such Series shall revert to and revest in the Issuer without any other act or formality whatsoever.

Section 403. Indenture Trustee’s Appointment as Attorney-in-Fact.

(a) The Issuer hereby irrevocably constitutes and appoints the Indenture Trustee, and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Issuer and in the name of the Issuer or in its own name, from time to time, for the purpose of carrying out the terms of this Indenture, to take any and all appropriate action and to execute and deliver any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Indenture; provided, however, that the Indenture Trustee has no obligation or duty to take such action or to determine whether to perfect, file, record or maintain any perfected, filed or recorded document or instrument (all of which the Issuer shall prepare, deliver and instruct the Indenture Trustee to execute) in connection with the grant or security interest in the Collateral hereunder.

(b) The Indenture Trustee shall not exercise the power of attorney or any rights granted to the Indenture Trustee pursuant to this Section 403 unless an Event of Default shall have occurred and then be continuing. The Issuer hereby ratifies, to the extent permitted by law, all actions that said attorney shall lawfully do, or cause to be done, by virtue hereof. The power of attorney granted pursuant to this Section 403 is a power coupled with an interest and shall be irrevocable until all Series of Notes are paid and performed in full.

(c) The powers conferred on the Indenture Trustee hereunder are solely to protect the Indenture Trustee’s interests in the Collateral and shall not impose any duty upon it to exercise any such powers except as set forth herein. The Indenture Trustee shall be accountable only for amounts that it actually receives as a result of the exercise of such powers and neither it nor any of its officers, directors, employees, agents or representatives shall be responsible to the Issuer for any act or failure to act, except for its own negligence or willful misconduct.

(d) The Issuer also authorizes (but does not obligate) the Indenture Trustee to (i) so long as a Manager Default is continuing and a Manager Termination Notice has been delivered in accordance with the terms of the Management Agreement, communicate in its own name, or to direct any other Person, including the Manager or a replacement Manager, to communicate with any party to any Contract or Lease relating to a Managed Container and (ii) so long as an Event of Default is continuing,

 

 

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and a Manager Termination Notice has been delivered in accordance with the terms of the Management Agreement, execute in connection with the sale of Collateral provided for in Article VIII hereof, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral.

(e) If the Issuer fails to perform or comply with any of its agreements contained herein and a Responsible Officer of the Indenture Trustee shall receive notice of such failure, the Indenture Trustee, with the consent of the Requisite Global Majority, shall cause performance or compliance, or acting at the direction of the Requisite Global Majority shall perform or comply, with such agreement; provided, however, that the Indenture Trustee shall have no obligation to so perform or comply if it has reasonable grounds to believe that payment of its expenses and interest thereon (as set forth in the following sentence) is not reasonably assured. The reasonable and documented expenses, including reasonable and documented attorneys’ fees and expenses, of the Indenture Trustee incurred in connection with such performance or compliance, shall be payable by the Issuer to the Indenture Trustee on demand and shall constitute additional Outstanding Obligations secured hereby and shall be paid in accordance with the provisions of Section 302 or Section 806 hereof.

Section 404. Release of Security Interest. The Indenture Trustee, at the written direction of the Manager, shall release from the Lien of this Indenture, any Managed Container and the Related Assets sold or transferred pursuant to Section 606(a) hereof. In effectuating such release, the Indenture Trustee shall be provided with and entitled to rely on: (A) so long as no Early Amortization Event is then continuing, a written direction of the Manager (with a copy to the Administrative Agent and each Series Enhancer, if any) identifying each Managed Container or other items to be released from the Lien of this Indenture in accordance with the provisions of this Section 404 accompanied by an Asset Base Certificate, or (B) if an Early Amortization Event is then continuing, all of the following: (i) the items set forth in (A), (ii) a certificate from the Manager (with a copy to the Administrative Agent and each Series Enhancer) stating that such release is in compliance with Sections 404 and 606(a) hereof and (iii) a written direction from the Administrative Agent and each Series Enhancer approving such release. The Administrative Agent shall provide such direction if the Administrative Agent has received the items referred to in (B) above and the officers of the Administrative Agent who regularly deal with the Manager in connection with the transactions contemplated hereby do not have actual knowledge that such certificates are inaccurate in any significant manner.

The Indenture Trustee will, promptly upon receipt of such certificate from the Manager and at the Issuer’s expense, execute and deliver to the Issuer, the Seller or the Manager, as appropriate, each Series Enhancer, each Hedge Counterparty and the Administrative Agent, a non-recourse certificate of release substantially in the form of Exhibit A hereto and such additional documents and instruments as that Person may reasonably request to evidence the termination and release from the Lien of this Indenture of such Managed Container and the Related Assets.

Section 405. Administration of Collateral. (a) The Indenture Trustee shall as promptly as practicable notify the Noteholders, each Series Enhancer, each Hedge Counterparty and the Administrative Agent of any Manager Default of which a Responsible Officer has actual knowledge. If a Manager Default shall have occurred and then be continuing, the Indenture Trustee, at the written direction of the Requisite Global Majority, shall deliver to the Manager (with a copy to the Administrative Agent, each Series Enhancer, each Hedge Counterparty and each Rating Agency) a Manager Termination Notice terminating the Manager of its responsibilities in accordance with the terms of the Management Agreement. Pursuant to the Administration Agreement, the Administrative Agent shall seek to appoint a replacement Manager acceptable to the Requisite Global Majority. If the Administrative Agent is unable to locate and qualify a replacement Manager acceptable to the Requisite Global Majority within sixty (60) days after the date of delivery of the Manager Termination Notice, then the Indenture Trustee may (and shall, upon the direction of the Requisite Global Majority) appoint, or petition a court of competent jurisdiction to appoint, a company acceptable to the Requisite Global

 

 

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Majority, having a net worth of not less than $5,000,000 and whose regular business includes equipment leasing or servicing, as the successor to the Manager of all or any part of the responsibilities, duties or liabilities of the Manager under the Management Agreement and the other Transaction Documents to which it is a party. The Manager shall continue to fulfill its duties and responsibilities as Manager until such time as its replacement is appointed and has assumed such responsibilities. The replaced Manager shall not be entitled to receive any compensation for any period after the effective date of such replacement, but shall be entitled to receive compensation for services rendered through the effective date of such replacement except to the extent that it is unable to fulfill such duties pending the appointment of a replacement Manager. If the Manager is unable to fulfill such duties pending the appointment of a replacement Manager, the Administrative Agent shall take such actions, which it is reasonably capable of performing and as the Requisite Global Majority shall direct to aid in the transition of the Manager; provided, however, that no provisions of this Indenture or the Administration Agreement shall require the Administrative Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties hereunder or under the Administration Agreement, or in the exercise of any of its rights, powers or duties, if the Administrative Agent shall have reasonable grounds for believing that timely repayment in full of such funds or adequate security or indemnity against such risk or liability is not reasonably assured after taking into account the reimbursement provisions set forth in Section 302 or Section 806, as applicable. All reimbursements to the Administrative Agent shall (unless the Requisite Global Majority has otherwise agreed in writing to indemnify the Administrative Agent) be payable on the immediately succeeding Payment Date pursuant to the provisions of Section 302 or Section 806, as applicable, hereof. Each Noteholder, the Indenture Trustee, each Series Enhancer and each Hedge Counterparty shall, by accepting the benefits of this Indenture, be deemed to have agreed that the duties of the Administrative Agent are not to be construed as those of a replacement Manager. In connection with the appointment of a replacement Manager, the Indenture Trustee or Administrative Agent may, with the written consent of the Requisite Global Majority, make such arrangements for the compensation of such replacement Manager out of Collections as the Indenture Trustee, the Administrative Agent and such replacement Manager shall agree; provided, however, that no such revised compensation shall be in excess of the Management Fees permitted the Manager under the Management Agreement and the arrangement for reimbursement of expenses shall be no more favorable than that set forth in the Management Agreement unless the Requisite Global Majority shall approve such higher amounts; provided, further, that in no event shall any of the Indenture Trustee, any Series Enhancer, any Hedge Counterparty or the Administrative Agent be liable to any replacement Manager for the Management Fees or any additional amounts (including expenses and indemnifications) payable to such replacement Manager, either pursuant to the Management Agreement or otherwise. The Indenture Trustee and such successor shall take such action, consistent with the Management Agreement, as shall be necessary to effectuate any such succession including exercising the power of attorney granted by the Manager pursuant to Section 9.4 of the Management Agreement.

(b) So long as a Manager Default has occurred and a Manager Termination Notice has been delivered in accordance with the terms of the Management Agreement, the Indenture Trustee may and shall, if directed in writing by the Requisite Global Majority, after first notifying the Issuer of its intention to do so, notify Account Debtors of the Issuer (and the Issuer hereby agrees to provide the Indenture Trustee all commercially reasonable information to identify and locate such Account Debtors), parties to the Contracts of the Issuer, obligors in respect of Instruments of the Issuer and obligors in respect of Chattel Paper of the Issuer that the Accounts and the right, title and interest of the Issuer in and under such Contracts, Instruments, and Chattel Paper (to the extent related to the Managed Containers) have been pledged to Indenture Trustee and that payments shall be made directly to the Indenture Trustee or the Trust Account; provided that a replacement Manager appointed pursuant to this Section 405 shall unless otherwise directed by the Requisite Global Majority exercise all of the foregoing rights, and that pending appointment of such replacement Manager, the then current Manager shall, unless otherwise directed by the Requisite Global Majority, be permitted to exercise such rights until the replacement Manager assumes the responsibility of the Manager. Upon the request of the Requisite Global Majority,

 

 

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the Issuer shall, or shall direct Manager to, so notify such Account Debtors, parties to such Contracts, obligors in respect of such Instruments and obligors in respect of such Chattel Paper. So long as a Manager Default has occurred and a Manager Termination Notice has been delivered in accordance with the terms of the Management Agreement, the Indenture Trustee shall at the written direction of the Requisite Global Majority communicate with such Account Debtors, parties to such Contracts, obligors in respect of such Instruments and obligors in respect of such Chattel Paper to verify with such parties, the existence, amount and terms of any such Accounts, Contracts, Instruments or Chattel Paper.

(c) Upon a Responsible Officer’s obtaining actual knowledge or the actual receipt of written notice by the Indenture Trustee that any repurchase obligations of the Seller under Section 3.03 of the Contribution and Sale Agreement have arisen, the Indenture Trustee shall notify each Series Enhancer, each Rating Agency, each Hedge Counterparty and the Administrative Agent of such event and shall enforce such repurchase obligations at the written direction of the Requisite Global Majority.

Section 406. Quiet Enjoyment. The security interest hereby granted to the Indenture Trustee by the Issuer is subject to the right of any lessee to the quiet enjoyment of the related Managed Container so long as such lessee is not in default under the Lease therefor.

ARTICLE V

RIGHTS OF NOTEHOLDERS; ALLOCATION AND APPLICATION OF COLLECTIONS;
REQUISITE GLOBAL MAJORITY

Section 501. Rights of Noteholders. The Noteholders of each Series shall have the right to receive, to the extent necessary to make the required payments with respect to the Notes of such Series at the times and in the amounts specified in the related Supplement, (i) the portion of Collections allocable to Noteholders of such Series pursuant to this Indenture and the related Supplement, (ii) funds on deposit in the Trust Account (subject to the priorities set forth in Sections 302 and 806 hereof) and the Restricted Cash Account and (iii) funds on deposit in any Series Account for such Series, or payable with respect to any Series Enhancement for such Series. Each Noteholder, by acceptance of its Notes, (a) acknowledges and agrees that (except as expressly provided herein and in a Supplement entered into in accordance with Section 1006(b) hereof) the Noteholders of a Series or Class shall not have any interest in any Series Account or Series Enhancement for the benefit of any other Series or Class and (b) ratifies and confirms the terms of this Indenture and the Transaction Documents executed in connection with such Series.

Section 502. Collections and Allocations. With respect to each Collection Period, Collections on deposit in the Trust Account will be allocated to each Series then Outstanding in accordance with Article III of this Indenture and the Supplements.

Section 503. Determination of Requisite Global Majority. A Requisite Global Majority shall exist with respect to any action proposed to be taken pursuant to the terms of this Indenture or any Supplement if (a) the Control Party or Control Parties representing more than fifty percent (50%) of the sum of the Existing Commitments of all Series of Outstanding Notes shall approve or direct such proposed action (in making such a determination, each Control Party shall be deemed to have voted the entire Existing Commitment of the related Series in favor of, or in opposition to, such proposed action, as the case may be) and (b) unless Control Parties representing more than sixty-six and two-thirds percent (66 2/3%) of the sum of the Existing Commitments of all Series shall have approved or directed such proposed action (in making such a determination, each Control Party shall be deemed to have voted the entire Existing Commitment of the related Series in favor of, or in opposition to, such proposed action, as the case may be), each Series Enhancer which is then a Control Party for any Series of Outstanding Notes shall have also approved or directed such proposed action. The Indenture Trustee shall be responsible for identifying the Requisite Global Majority in accordance with the terms of this Section 503 based on information provided by the Note Registrar.

 

 

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ARTICLE VI

COVENANTS

For so long as any Outstanding Obligations have not been paid or performed, the Issuer shall observe each of the following covenants:

Section 601. Payment of Principal and Interest; Payment of Taxes. (a) The Issuer will duly and punctually pay the principal of, and interest, on the Notes in accordance with the terms of the Notes, this Indenture and the related Supplement.

(b) The Issuer will take all actions as are necessary to insure that all taxes, assessments and governmental levies that are payable by the Issuer are paid when due except (i) such as are contested in good faith and by appropriate proceedings and (ii) if the failure to make such payment is not adverse in any material respect to the Noteholders and does not give rise to any Liens other than Permitted Encumbrances.

Section 602. Maintenance of Office. As of the Closing Date, the Issuer’s only “place of business” within the meaning of Section 9-307 of the UCC is located at its address set forth in Section 1307. The Issuer shall not establish a new place of business or location for its chief executive office or change its jurisdiction of formation unless (i) the Issuer shall provide each of the Indenture Trustee, each Rating Agency, the Administrative Agent, each Hedge Counterparty and each Series Enhancer not less than thirty (30) days’ prior written notice of its intention so to do, clearly describing such new location and providing such other information in connection therewith as the Indenture Trustee, the Administrative Agent, each Hedge Counterparty or each Series Enhancer may reasonably request, (ii) not less than fifteen (15) days prior to the effective date of such relocation, the Issuer shall have taken, at its own cost, all action necessary so that such change of location does not impair the security interest of the Indenture Trustee in the Collateral, or the perfection of the sale or contribution of the Containers to the Issuer, and shall have delivered to the Indenture Trustee, the Administrative Agent, each Hedge Counterparty and each Series Enhancer copies of all filings required in connection therewith and (iii) the Issuer has delivered to the Indenture Trustee, the Administrative Agent, each Series Enhancer, each Eligible Hedge Counterparty and each Rating Agency, one or more Opinions of Counsel satisfactory to the Requisite Global Majority, stating that, after giving effect to such change of location: (A) the Seller and the Issuer will not, pursuant to applicable Insolvency Law, be substantively consolidated in the event of any Insolvency Proceeding by, or against, the Seller, (B) under applicable Insolvency Law, the transfers of Transferred Assets made in accordance with the terms of the Transaction Documents will be treated as a “true sale” in the event of any Insolvency Proceeding by, or against, the Seller and (C) either (1) in the opinion of such counsel, all registration of charges, financing statements, or other documents of similar import, and amendments thereto have been executed (if applicable) and filed that are necessary to perfect the interest of the Issuer and the Indenture Trustee in the Transferred Assets, or (2) stating that, in the opinion of such counsel, no such action shall be necessary to perfect such interest; provided that the opinions required in this Section 602(iii)(A) and (B) shall not be required unless the Issuer establishes a new place of business outside of the United States or a location for its chief executive office outside of the United States or changes its jurisdiction of formation to a location outside of the United States.

 

 

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Section 603. Corporate Existence. The Issuer will keep in full effect its existence, rights and franchises as a limited liability company organized under the laws of the State of Delaware, and will obtain and preserve its qualification in each jurisdiction in which such qualification is necessary to protect the validity and enforceability of this Indenture, any Supplements and the Notes except where the failure to obtain or preserve such qualification is not reasonably expected to result in a Material Adverse Change.

Section 604. Protection of Collateral. The Issuer will from time to time execute (if applicable) and file all financing statements, all amendments thereto and continuation statements, instruments of further assurance and other instruments, and will, upon the reasonable request of the Manager, the Indenture Trustee, the Administrative Agent, any Hedge Counterparty or any Series Enhancer, take such other action necessary or advisable to:

(a) maintain or preserve the Lien of this Indenture (and the priority thereof) including executing and filing such documents as may be required under any international convention for the perfection of interests in Managed Containers that may be adopted subsequent to the date of this Indenture;

(b) perfect, publish notice of, and protect the validity of the security interest in the Collateral created pursuant to this Indenture;

(c) enforce any of the items of the Collateral;

(d) preserve and defend its right, title and interest to the Collateral and the rights of the Indenture Trustee in such Collateral against the claims of all Persons (other than the Noteholders or any Person claiming through the Noteholders); and

(e) pay any and all taxes levied or assessed upon all or any part of the Collateral, except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Noteholders.

In furtherance of clauses (b) and (c) above, the Issuer hereby agrees that if at any time subsequent to a Closing Date there is a change in Applicable Law (or a change in the interpretation of Applicable Law as in effect on such Closing Date) which, in the reasonable judgment of the Requisite Global Majority, may affect the perfection of the Indenture Trustee’s security interest in the Collateral, then the Issuer shall, within thirty (30) days after request from the Requisite Global Majority, furnish to the Indenture Trustee, the Administrative Agent, each Rating Agency and each Series Enhancer, an Opinion of Counsel either (i) stating that, in the opinion of such counsel, such action has been taken with respect to the recording, filing, recording and refiling of this Indenture, any Supplements hereto and any other requisite documents, and with respect to the filing of any financing statements and continuation statements, as are necessary to maintain the Lien created by this Indenture and reciting the details of such action, or (ii) stating that, in the opinion of such counsel, no such action is necessary to maintain such Lien. Such Opinion of Counsel shall also describe the recording, filing, re-recording and refiling of this Indenture, any Supplements hereto and any other requisite documents and the execution and filing of any financing statements and continuation statements that, in the opinion of such counsel, are required to maintain the lien and security interest of this Indenture.

Section 605. Performance of Obligations.

(a) Except as otherwise permitted by this Indenture, the Management Agreement or the Contribution and Sale Agreement, the Issuer will not take, or fail to take, any action, and will use its best efforts not to permit any action to be taken by others, which would release any Person from any of such Person’s covenants or obligations under any agreement or instrument included in the Collateral, or which would result in the amendment, hypothecation, subordination, termination or discharge of, or

 

 

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impair the validity or effectiveness of, any such agreement or instrument; provided that, nothing in this Indenture shall prohibit the Issuer, or the Manager on the Issuer’s behalf, from renegotiating, amending or consenting to waivers to Leases in accordance with the terms of the Management Agreement.

(b) Nothing in this Indenture or any Supplement shall be construed as requiring the consent of the Indenture Trustee, any Series Enhancer or any Noteholder for the exercise by any Hedge Counterparty of its rights to (i) terminate the related Hedge Agreement in accordance with its terms in the event of any event of default or termination event (however defined) under such Hedge Agreement, (ii) undertake any permitted transfer under any Hedge Agreement, or (iii) reduce the notional amount in accordance with the terms of any Hedge Agreement in the event of a notional reduction event (however defined).

Section 606. Negative Covenants. The Issuer will not, without the prior written consent of the Requisite Global Majority:

(a) at any time sell, transfer, exchange or otherwise dispose of any of the Collateral, except as follows:

(i) in connection with a sale, conveyance or transfer pursuant to the provisions of Section 612 or Section 816 hereof; or

(ii) in connection with a substitution or repurchase of Managed Containers as permitted or required in accordance with the terms of the Contribution and Sale Agreement; or

(iii) sales of Managed Containers (including any such sales resulting from the sell/repair decision of the Manager) to unaffiliated third parties, and to the extent that such sales are on terms and conditions that would be obtained in an ordinary course, arms-length transaction, to Affiliates regardless of the sales proceeds realized from such sales so long as an Asset Base Deficiency is not then continuing or would result from such sale of Managed Containers after giving effect to the application of the proceeds of such sales; provided, however, that if an Early Amortization Event has occurred and is continuing or would result from any such sale (after giving effect to the application of the proceeds thereof), no such sale may be made to an Affiliates under this clause (iii) unless the net proceeds from such sale are greater than or equal to the Adjusted Net Book Value of the Containers being sold; or

(iv) if an Asset Base Deficiency is then continuing or would result from such sale of Managed Containers after giving effect to the application of the proceeds of such sales, sales of Managed Containers (including any such sales resulting from the sell/repair decision of the Manager) regardless of the sales proceeds realized from such sales so long as (A) any sales to Affiliates made pursuant to this clause (iv) are made on terms and conditions that would be obtained in an ordinary course, arms-length transaction and the net proceeds from any such sale are greater than or equal to the Adjusted Net Book Value of the Managed Containers being sold and (B) the aggregate sum of the Net Book Values of all Managed Containers that were sold pursuant to this clause (iv) during the applicable Collection Period and the three (3) immediately preceding Collection Periods for proceeds which are less than the Adjusted Net Book Value of the Managed Containers so sold does not exceed an amount equal to the product of (x) five percent (5%) times (y) an amount equal to a quotient (A) the numerator of which is equal to the sum of the aggregate Net Book Value of all Managed Containers as of the last day of each of the four (4) immediately preceding Collection Periods and (B) the denominator of which is equal to four (4); or

 

 

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(v) any other sales of Managed Containers not covered by the preceding clauses provided that each such sale shall be specifically approved by (A) the Requisite Global Majority and (B) the managers of the Issuer in accordance with the provisions of the Issuer’s limited liability company agreement; or

(vi) in connection with a Casualty Loss.

Notwithstanding the foregoing limitation of this Section 606(a), sales of Managed Containers shall be permitted at such other times and in such other amounts as the Indenture Trustee (acting at the direction of the Requisite Global Majority) shall permit.

Notwithstanding anything to the contrary, during the continuation of an Early Amortization Event, the Issuer shall not sell all, or substantially all, of the Managed Containers without the consent of the Requisite Global Majority and each Series Enhancer (if such Series Enhancer is then the Control Party for a Series of Outstanding Notes or shall have made an unreimbursed payment on its Enhancement Agreement) if an Asset Base Deficiency shall have occurred and be continuing or would result from such proposed sale after giving effect to the application of the proceeds of such sales.

(b) claim any credit on, make any deduction from the principal, premium, if any, or interest payable in respect of the Notes (other than amounts properly withheld from such payments under any Applicable Law) or assert any claim against any present or former Noteholder by reason of the payment of any taxes levied or assessed upon any of the Collateral; or

(c) release any item from the Collateral, except as permitted pursuant to the terms of a Transaction Document.

Section 607. Corporate Separateness of the Issuer.

(a) The Issuer shall (1) conduct its business in its own name, (2) maintain its books and records separate from those of any other Person, (3) not commingle its funds with any other Person (except for any commingling of Collections which may occur prior to the identification and segregation of such amounts in accordance with the terms of the Management Agreement) and maintain its bank accounts separate from those of any other Person, (4) maintain separate financial statements, showing its assets and liabilities separate and apart from those of any other Person, (5) hold itself out as a separate entity and (6) observe all other organizational formalities.

(b) Notwithstanding any provision of law which otherwise empowers the Issuer, the Issuer shall not (1) hold itself out as being liable for the debts of any other Person, (2) act other than in its limited liability company name and through its duly authorized officers, managers or agents, (3) enter into any transaction described in Section 610 (except pursuant to this Indenture) other than trade payables and expense accruals incurred in the ordinary course of its business, or (4) engage in any other activity not contemplated by this Indenture or other Transaction Documents.

Section 608. No Bankruptcy Petition. The Issuer shall not (1) commence any Insolvency Proceeding seeking to have an order for relief entered with respect to it, or seeking reorganization, arrangement, adjustment, wind-up, liquidation, dissolution, composition or other relief with respect to it or its debts, (2) seek appointment of a receiver, trustee, custodian or other similar official for it or any part of its assets, (3) make a general assignment for the benefit of creditors, or (4) take any action in furtherance of, or consenting or acquiescing in, any of the foregoing.

 

 

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Section 609. Liens. The Issuer shall not (i) permit any Lien (except any Permitted Encumbrance) to be created on or extend to or otherwise arise upon or burden the Collateral or any part thereof or any interest therein or the Proceeds thereof; or (ii) permit the Lien of this Indenture not to constitute a valid first priority perfected security interest in the Collateral to the extent that such Lien can be perfected pursuant to Applicable Law.

Section 610. Other Debt. The Issuer shall not contract for, create, incur, assume or suffer to exist any Indebtedness of the Issuer other than (i) the Notes issued pursuant to this Indenture or any Supplement, (ii) any Management Fee, Manager Advances and all other amounts payable pursuant to the provisions of the Management Agreement and reimbursements payable pursuant to the terms of the Parent Guaranty, (iii) any obligation (including a deferred purchase price note and any normal warranty) arising in connection with a purchase or sale of Containers permitted by the Transaction Documents (as in effect as of the date hereof and as amended, restated or otherwise modified after the date hereof in accordance with the terms thereof), but only to the extent of the time limit contemplated by Section 3.01(ii) of the Contribution and Sale Agreement, (iv) any Indebtedness (including any Hedge Agreement) that is permitted or required pursuant to the terms of any Transaction Document, and (v) trade payables and expense accruals incurred in the ordinary course and which are incidental to the purposes permitted pursuant to the Issuer’s organizational documents.

Section 611. Guarantees, Loans, Advances and Other Liabilities. Except for investments in Eligible Investments, the Issuer will not make any loan, advance or credit to, or guarantee (directly or indirectly or by an instrument having the effect of assuring another’s payment or performance on any obligation or capability of so doing, or otherwise), endorse (except for the endorsement of checks for collection or deposit) or otherwise become contingently liable, directly or indirectly, in connection with the obligations, stock or dividends of, or own, purchase, repurchase or acquire (or agree contingently to do so) any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any other Person. However, the preceding sentence shall not limit the terms of any Note Purchase Agreement or Enhancement Agreement or prevent the execution, delivery and performance of any Note Purchase Agreement or Enhancement Agreement by the Issuer.

Section 612. Consolidation, Merger and Sale of Assets. (a) The Issuer shall not consolidate with or merge with, or into, any other Person or sell, convey, transfer or lease any of its assets, whether in a single transaction or a series of transactions, to any Person except for (i) any such sale, conveyance or transfer contemplated in this Indenture or any Supplement or the Management Agreement and (ii) the leasing or sale of the Managed Containers in accordance with the terms of the Management Agreement.

(b) The obligations of the Issuer hereunder shall not be assignable nor shall any Person succeed to the obligations of the Issuer hereunder except in each case in accordance with the provisions of this Indenture.

Section 613. Other Agreements; Amendment of Transaction Documents. (a) The Issuer will not after the date of the issuance of any Notes enter into, or become a party to, any agreements or instruments other than the Transaction Documents and any other agreement(s) contemplated by the terms of the Transaction Documents, including, without limitation, (i) any agreement(s) for disposition of the Transferred Assets permitted by Sections 606, 804 or 816 hereof and (ii) any agreement(s) for the sale, repurchase, lease or re-lease of a Managed Container made in accordance with the provisions of the Contribution and Sale Agreement and the Management Agreement.

(b) The Issuer will not amend, modify or waive any provision of any Transaction Document, or give any approval or consent or permission provided for therein, except in accordance with the express terms of such Transaction Document.

 

 

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Section 614. Charter Documents. The Issuer will not amend or modify (a) its certificate of formation or (b) Section 4.1, 8.3, 8.4, 16.1, 16.2, 16.3 or 16.9 of its limited liability company agreement without (i) the prior written consent of the Requisite Global Majority, and (ii) satisfaction of the Rating Agency Condition. Except as otherwise provided in clause (b) above, the Issuer shall deliver written notice to each Rating Agency of any amendment or modification to its limited liability company agreement.

Section 615. Capital Expenditures. The Issuer will not make any expenditure (by long term or operating lease or otherwise) for capital assets (both realty and personalty), except for (a) acquisition of additional Managed Containers from the Seller in accordance with the terms of the Contribution and Sale Agreement or (b) capital improvements to the Managed Containers made in the ordinary course of its business and in accordance with the terms of the Management Agreement.

Section 616. Permitted Activities; Compliance with Organizational Documents. The Issuer will not engage in any activity or enter into any transaction except for those activities that are specified in its organizational documents or that are contemplated by a Transaction Document. The Issuer will observe all organizational and managerial procedures required by its organizational documents and applicable law. The Issuer shall (i) keep complete minutes of the meetings of the managers and/or members of the Issuer and (ii) continuously maintain the resolutions, agreements and other instruments underlying the transaction contemplated by the Transaction Documents.

Section 617. Investment Company Act. The Issuer will conduct its operations in a manner which will not subject it to registration as an “investment company” under the Investment Company Act of 1940, as amended.

Section 618. Payments of Collateral. If the Issuer shall receive from any Person any payments with respect to the Collateral (to the extent such Collateral has not been released from the Lien of this Indenture), the Issuer shall receive such payment in trust for the Indenture Trustee, as secured party hereunder, and subject to the Indenture Trustee’s security interest and shall deposit such payment in the Trust Account as required under this Indenture.

Section 619. Notices. The Issuer shall notify the Indenture Trustee and each Series Enhancer in writing of any of the following promptly, but in any event within seven (7) Business Days upon an Authorized Officer learning of the occurrence thereof, describing the same and, if applicable, the steps being taken by the Person(s) affected with respect thereto:

(a) Default. The occurrence of an Event of Default;

(b) Litigation. The institution of any litigation, arbitration proceeding or Proceeding before any Governmental Authority which reasonably will be expected to result in a Material Adverse Change;

(c) Material Adverse Change. The occurrence of a Material Adverse Change; or

(d) Other Events. The occurrence of an Early Amortization Event or such other events that would, with the giving of notice or the passage of time or both, constitute an Event of Default or an Early Amortization Event.

Section 620. Books and Records. The Issuer shall maintain complete and accurate books and records in which full and correct entries in conformity with GAAP shall be made of all dealings and transactions in relation to its business and activities. In connection with each transfer of Transferred Assets to the Issuer, the Issuer shall report, or cause to be reported, on its financial records the

 

 

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transfer of the Transferred Assets as a purchase or capital contribution (if applicable) under GAAP. The Issuer will ensure that any consolidated financial statements of TAL and TAL International Group note that Issuer is a bankruptcy remote special purpose subsidiary established to obtain securitized financing.

Section 621. Subsidiaries. The Issuer shall not create any Subsidiaries.

Section 622. Investments. The Issuer shall not make or permit to exist any Investment in any Person except for Investments in Eligible Investments made in accordance with the terms of this Indenture.

Section 623. Use of Proceeds. (a) The Issuer shall use the proceeds of the Notes only for (i) the purchase of Containers and Related Assets and (ii) other general company purposes including the distribution of dividends, repayment of debt and paying costs relating to the issuance of the Notes and any other purposes contemplated by Section 302.

(b) The Issuer shall not permit any proceeds of the Notes to be used, either directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of “purchasing or carrying any margin stock” within the meaning of Regulation U of the Board of Governors of the Federal Reserve System, as amended from time to time, and shall furnish to each Noteholder, upon its request, a statement in conformity with the requirements of Regulation U.

Section 624. Asset Base Certificate. The Issuer shall prepare and deliver to the Indenture Trustee on or before each Determination Date, an Asset Base Certificate as of the end of the immediately preceding fiscal month of the Issuer.

Section 625. Financial Statements. The Issuer shall deliver to the Indenture Trustee the following financial statements prepared in accordance with GAAP (subject to the limitations set forth below): (a) the quarterly financial statements of the Issuer within sixty (60) days after the end of each fiscal quarter ending on or after June 30, 2008; (b) annual unaudited financial statements of the Issuer within one hundred and twenty (120) days after the end of each fiscal year ending on or after December 31, 2008; (c) annual audited consolidated and unaudited consolidating financial statements of TAL International Group and its consolidated subsidiaries together with the report of its Independent Accountants, within (x) in the event that TAL International Group shall not then have at least one class of securities registered under the Exchange Act, one hundred fifty (150) days after the end of each fiscal year ending on or after December 31, 2008, or (y) in the event that TAL International Group shall then have at least one class of securities registered under the Exchange Act, the earlier of (A) one hundred fifty (150) days after the end of each fiscal year ending on or after December 31, 2008, or (B) ten (10) days following TAL International Group’s filing of such annual audited consolidated financial statements with the Securities and Exchange Commission; (d) beginning with the fiscal year ending December 31, 2007, within one hundred fifty (150) days after the end of each fiscal year of TAL International Group, a report addressed to the manager of the Issuer, to the effect that such firm of accountants has audited the books and records of TAL International Group, and issued its report in connection with the audit report on the consolidated financial statements of TAL International Group and specifying the results of the application of such agreed upon procedures, as the Administrative Agent shall reasonably agree from time to time, relating to the objectives specified on Exhibit D to the Management Agreement; and (e) within sixty (60) days after the close of the first three fiscal quarters in each fiscal year of TAL International Group, the consolidated balance sheet of TAL International Group and its consolidated subsidiaries as at the end of such fiscal quarter, the related consolidated statements of income for such fiscal quarter and the related consolidated statements of shareholder’s equity and cash flows for the elapsed portion of the fiscal year ended with the last day of such fiscal quarter. All such financial statements shall be prepared in accordance with GAAP, subject to, in the case of unaudited financial statements, the absence of footnotes, and in the case of the quarterly financial statements, the absence of year-end adjustments. In addition to

 

 

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the foregoing, within one hundred fifty (150) days after the end of each fiscal year, the Issuer shall deliver to the Indenture Trustee, each Rating Agency and each Series Enhancer an Officer’s Certificate certifying that, as of the date of such certificate, there have been no changes in the name or jurisdiction of formation of the Issuer. Delivery of such reports, information and documents to the Indenture Trustee is for informational purposes only and the Indenture Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Issuer’s compliance with any of its covenants hereunder (as to which the Indenture Trustee is entitled to rely exclusively on Officer’s Certificates).

Section 626. UNIDROIT Convention. The Issuer shall comply with the terms and provisions of the UNIDROIT Convention or any other internationally recognized system for recording interests in or liens against shipping containers at the time that such convention is adopted.

Section 627. Other Information. For so long as any of the Notes are “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act and the Issuer is not subject to Section 13 or 15(d) of the Exchange Act, the Issuer will, provide or cause to be provided to any Noteholder and any prospective purchaser thereof designated by such a Noteholder, upon the request of such Noteholder or prospective purchaser, the information required to be provided to such Noteholder or prospective purchaser by Rule 144A(d)(4) under the Securities Act.

Section 628. Hedging Requirement. On the initial funding date and thereafter within thirty (30) days after the end of each calendar quarter, the Issuer will enter into, and maintain for so long as any Notes or other obligations under the Transaction Documents remain unpaid, one or more Interest Rate Hedge Agreements with an aggregate notional balance equal to or exceeding the sum of (i) seventy percent (70%) of the aggregate Net Book Values of those Eligible Containers that are, as of the end of such calendar quarter (or, prior to thirty (30) days after the end of the first calendar quarter following the initial funding date, as of the initial funding date), subject to an unexpired Lease that requires the lessee to maintain specific containers on-hire for the duration of such Lease and (ii) without duplication of the Leases referred to in clause (i), one hundred percent (100%) of the aggregate Net Book Values of those Eligible Containers that are, as of the end of such calendar quarter (or, prior to thirty (30) days after the end of the first calendar quarter following the initial funding date, as of the initial funding date), subject to a Finance Lease, all of which Interest Rate Hedge Agreements shall have a projected amortization schedule in accordance with Exhibit F hereto.

(a) If the Issuer, or the Manager, on behalf of the Issuer, fails to comply with the Hedging Requirement, the Requisite Global Majority shall have the right, in its sole discretion and at the expense of the Issuer if necessary (as determined in the sole discretion of the Requisite Global Majority), to direct the Indenture Trustee, to enter into or maintain one or more Interest Rate Hedge Agreements selected by the Requisite Global Majority (in its sole discretion) on behalf of the Issuer such that, after giving effect to such action, the Issuer will be in compliance with the Hedging Requirement. In the event the Requisite Global Majority determines to direct the Indenture Trustee to enter into or maintain an Interest Rate Hedge Agreement on the Issuer’s behalf, the Requisite Global Majority shall promptly send a copy of any such agreement to the Issuer and may provide the Indenture Trustee and Manager on behalf of the Issuer with a written direction to deposit in the Trust Account certain amounts to reimburse the Requisite Global Majority or a third party for the costs of such Interest Rate Hedge Agreement.

(b) If at any time while the Notes are Outstanding an Interest Rate Hedge Counterparty ceases to be an Eligible Interest Rate Hedge Counterparty, the Issuer shall within sixty (60) days after it obtains knowledge of such event, either (i) replace the non-conforming Interest Rate Hedge Counterparty with an Eligible Interest Rate Hedge Counterparty or (ii) require the non-conforming Interest Rate Hedge Counterparty to deliver a letter of credit or provide alternative credit support in order to support its obligations under the Interest Rate Hedge Agreement, as Issuer and such non-conforming Interest Rate Hedge Counterparty may agree, subject to the consent of the Requisite Global Majority and the prior written confirmation that the Rating Agency Condition has been satisfied.

 

 

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(c) All payments received from all such Interest Rate Hedge Agreements shall be deposited directly into the Trust Account.

Section 629. Ownership of Issuer. All of the issued and outstanding membership interests in the Issuer shall be owned by TAL or any of its Subsidiaries.

Section 630. Intentionally Omitted.

Section 631. Tax Election of the Issuer. The Issuer will not elect or agree to elect to be treated as an association taxable as a corporation for United States federal income tax or any State income or franchise tax purposes.

Section 632. Rating Agency Notices. Subject to the application of applicable law, the Issuer shall promptly deliver a copy of any written notice concerning the Issuer’s credit rating received by it from any Rating Agency to the Indenture Trustee and each Series Enhancer.

Section 633. Compliance with Law. The Issuer shall comply with any applicable statute, license, rule or regulation by which it or any of its properties may be bound if the failure to comply would reasonably be expected to result in a Material Adverse Effect.

ARTICLE VII

DISCHARGE OF INDENTURE; PREPAYMENTS

Section 701. Full Discharge. Upon payment in full of all Outstanding Obligations, the Indenture Trustee shall execute and deliver to the Issuer such deeds or other instruments as shall be requisite to evidence the satisfaction and discharge of this Indenture and the security hereby created with respect to each Series, and to release the Issuer from its covenants contained in this Indenture and the related Supplement with respect to each such Series. In connection with the satisfaction and discharge of this Indenture, the Indenture Trustee shall be provided with, and shall be entitled to conclusively rely upon, an Opinion of Counsel stating that all conditions precedent specified in the Indenture to such satisfaction and discharge have been satisfied.

Section 702. Prepayment of Notes.

(a) Mandatory Prepayments. Unless otherwise specified in a Supplement, the Issuer shall be required to prepay the then unpaid principal balance of all, or a portion of, one or more Series of Notes then Outstanding if, on any Payment Date, an Asset Base Deficiency exists, and has not otherwise been cured by such date through the acquisition of additional Eligible Containers or otherwise. Such Prepayment (a “Supplemental Principal Payment”) shall be in the amount of such Asset Base Deficiency and shall be paid in accordance with the priority of payments set forth in Section 302 hereof. The calculations referred to herein shall be evidenced by the Asset Base Certificate received by the Indenture Trustee on any Determination Date. On each Payment Date, any Supplemental Principal Payment Amount then due and owing, shall be applied first to each Series of Warehouse Notes then Outstanding on a pro rata basis, in proportion to the then unpaid principal balance of such Warehouse Notes, until the principal balances of all Warehouse Notes have been paid in full, and then to all Series of Term Notes then Outstanding on a pro rata basis, in proportion to the then unpaid principal balance of each such

 

 

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Series of Term Notes. Notwithstanding the foregoing, if sufficient funds are not available to allow the Issuer to prepay the principal balance of the Warehouse Notes in an amount equal to the Asset Base Deficiency on such Payment Date, then the amount of any Supplemental Principal Payment Amount to be actually paid on such Payment Date shall be allocated among all Series of Notes then Outstanding (including the Term Notes) on a pro rata basis, in proportion to the then unpaid principal balance of such Notes.

(b) Voluntary Prepayments. So long as no Early Amortization Event is then continuing, the Issuer may, from time to time, make an optional Prepayment of principal of the Notes of a Series at the times, in the amounts and subject to the conditions and limitations set forth in the Supplement for the Series of Notes to be prepaid. If an Early Amortization Event is then continuing, all optional Prepayments made in accordance with the provisions of this Section 702(b) shall be applied in accordance with the applicable provisions of Section 302 hereof. The Issuer shall promptly confirm any telephonic notice of prepayment in writing. Any optional Prepayment of principal made by the Issuer pursuant to this Section 702(b) shall also include accrued interest to the date of the prepayment on the amount being prepaid. Any optional Prepayment made pursuant to the provisions of this Section 702(b) shall be accomplished by a deposit of funds directly into the Trust Account and, unless otherwise specified in the Supplement for any Series of Notes then Outstanding, may be applied by the Issuer to reduce the unpaid principal balance of one or more Series of Notes then Outstanding, such Series to be selected in the sole discretion of the Issuer. Notice of any voluntary prepayment of a Series of Term Notes to be made by the Issuer pursuant to the provisions of this Section 702(b) shall be given by the Issuer to the Indenture Trustee and, if applicable, the Noteholders of the Series of Notes to be prepaid, not later than the third (3rd) Business Day (or such longer period of time as specified in the related Supplement for a Series), prior to the date of such prepayment and not earlier than the Payment Date immediately preceding the date of such Prepayment.

(c) Adjustment of Prospective Minimum Principal Payment Amounts and Scheduled Principal Payment Amounts. In the event that the Issuer makes a Prepayment of less than all of the aggregate unpaid principal balance of any Series of Term Notes in accordance with the provisions of Section 702(a) or Section 702(b), then the Issuer shall promptly (but in any event within five (5) Business Days after the date on which such Prepayment is made) thereafter recalculate (subject to verification by each Series Enhancer) the Minimum Principal Payment Amount and Scheduled Principal Payment Amount for each future Payment Date such that, after giving effect to such adjustment, the Minimum Principal Payment Amounts and Scheduled Principal Payment Amounts for all subsequent Payment Dates for such Series of Term Notes shall be reduced by an amount equal to the quotient of (i) the aggregate amount of the Prepayment actually received by the Noteholders of such Series divided by (ii) the number of remaining Payment Dates to and including, (A) the Legal Final Maturity Date (with respect to the Minimum Principal Payment Amount) or (B) the Expected Final Maturity Date (with respect to the Scheduled Principal Payment Amount), for such Series of Notes.

Section 703. Unclaimed Funds. In the event that any amount due to any Noteholder remains unclaimed, the Issuer shall, at its expense, cause to be published once, in the eastern edition of The Wall Street Journal, notice that such money remains unclaimed. Any such unclaimed amounts shall not be invested by the Indenture Trustee (notwithstanding the provisions of Section 303 hereof) and no additional interest shall accrue on the related Note subsequent to the date on which such funds were first available for distribution to such Noteholder. Any such unclaimed amounts shall be held by the Indenture Trustee in trust until the latest of (i) two (2) years after the date of the publication described in the second preceding sentence, (ii) the date all other Noteholders of such Series shall have received full payment of all principal, interest, premium, if any, and other sums payable to them on such Notes or the Indenture Trustee shall hold (and shall have notified the Noteholders that it holds) in trust for that purpose an amount sufficient to make full payment thereof when due and (iii) the date the Issuer shall have fully performed and observed all its covenants and obligations contained in this Indenture and the related

 

 

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Supplement with respect to such Series of Notes. Thereafter, any such unclaimed amounts shall be paid to the Issuer by the Indenture Trustee on written demand; and thereupon each of the Indenture Trustee and the Issuer shall be released from all further liability with respect to such monies, and thereafter the Noteholders in respect of which such monies were so paid to the Issuer shall have no rights in respect thereof; provided, that if such money or any portion thereof that would be paid to the Issuer had been previously deposited by the Series Enhancer of such Series with the Indenture Trustee for the payment of principal or interest on the Notes of such Series, to the extent any amounts are owing to such Series Enhancer, such amounts shall be paid promptly to such Series Enhancer.

ARTICLE VIII

DEFAULT PROVISIONS AND REMEDIES

Section 801. Event of Default. “Event of Default”, wherever used herein with respect to any Series of Notes, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any Governmental Authority):

 

(1)

the occurrence of the events set forth in clause (A), clause (B) or clause (C) at the times set forth therein;

(A) default in (x) the payment on any Payment Date of any interest payment then due and payable on any Series of Notes and the continuation of such default for more than three (3) Business Days, or (y) the payment on the Legal Final Maturity Date of any Series of Notes of the then unpaid principal balance of such Series of Notes;

(B) default in the payment of (x) any Indenture Trustee’s Fees then due and payable or (y) a Premium or other amounts due and owing to any Series Enhancer, and the continuation of such default contemplated by clause (x) or clause (y) of this clause (B) for more than five (5) Business Days after the amounts in such clause (x) or clause (y) shall have become due and payable in accordance with the terms of such Notes, this Indenture and the related Supplement;

(C) default in the payment of other amounts not dealt with in clauses (A) or (B) above owing to the Noteholders of any Series and the continuation of such default for more than thirty (30) days after the same shall have become due and payable in accordance with the terms of such Notes, this Indenture and the related Supplement;

 

(2)

default in the observation or performance of any covenant of the Issuer set forth in Sections 608, 612 or 621 hereof which breach materially and adversely affects the interest of any Noteholder or Series Enhancer (if such Series Enhancer is then the Control Party for a Series of Outstanding Notes or shall have made an unreimbursed payment on its Enhancement Agreement);

 

 

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(3)

the occurrence of the events set forth in clause (A) or (B) at the times set forth therein:

(A) default in the observation or performance of any covenant of the Issuer set forth in Sections 606, 607, 609, 610, 611, 613(a), 616 or 622 hereof which breach materially and adversely affects the interest of any Noteholder or Series Enhancer (if such Series Enhancer is then the Control Party for a Series of Outstanding Notes or shall have made an unreimbursed payment on its Enhancement Agreement), and, if curable, continues unremedied for twenty (20) days after the date on which there has been given to the Issuer, by the Indenture Trustee, any Series Enhancer or any Noteholder, a written notice specifying such default or breach and requiring it to be remedied;

(B) default in any material respect in the observation or performance of any covenant of the Issuer set forth in Sections 619(a) or 619(d) and the continuation of such default for three (3) Business Days;

 

(4)

the occurrence of the events set forth in clause (A), (B) or (C) at the times set forth herein:

(A) default in the observation or performance of any covenant of the Issuer set forth in Sections 602, 614, 615 or 623(b) hereof which breach materially and adversely affects the interest of any Noteholder or Series Enhancer (if such Series Enhancer is then the Control Party for a Series of Outstanding Notes or shall have made an unreimbursed payment on its Enhancement Agreement), and, if curable, continues for thirty (30) days after the date on which there has been given to the Issuer, by the Indenture Trustee, any Series Enhancer or any Noteholder, a written notice specifying such default or breach and requiring it to be remedied;

(B) default in any material respect in the observation or performance of any covenant of the Issuer set forth in Sections 613(b), 624 or 632 and, if curable, which continues for thirty (30) days after the date on which there has been given to the Issuer, by the Indenture Trustee, any Series Enhancer or any Noteholder, a written notice specifying such default or breach and requiring it to be remedied;

(C) default in any material respect in the observation or performance of any covenant of the Issuer to deliver financial statements and reports set forth in the first sentence of Section 625 and the continuation of such default for thirty (30) days after the date on which there has been given to the Issuer, by the Indenture Trustee, any Series Enhancer or any Noteholder, a written notice specifying such default or breach and requiring it to be remedied; provided, however, that (x) if the reason for such default is primarily attributable to changes in accounting principles or interpretations or the application of the same, (y) such changes are not related to the assets of the Issuer and (z) no Manager Default then exists under Sections 9.1.9 through 9.1.12 of the Management Agreement, then such default shall not constitute an Event of Default under this clause (C) unless such failure materially and adversely affects the interests of any Noteholder or any Series Enhancer (if such Series Enhancer is then the Control Party for a Series of Outstanding Notes or shall have made an unreimbursed payment on its Enhancement Agreement);

 

(5)

default in the performance, or breach, in any material respect, of (a) any covenant of the Issuer in this Indenture or any other Transaction Document (other than a covenant or agreement a breach of which or default in the performance of which

 

 

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is specifically dealt with elsewhere in this Section 801) which materially and adversely affects the interest of any Noteholder or any Series Enhancer (if such Series Enhancer is then the Control Party for a Series of Outstanding Notes or shall have made an unreimbursed payment on its Enhancement Agreement) and which, if curable, continues for sixty (60) days after the date on which there has been given to the Issuer, by the Indenture Trustee, or to the Issuer or the Seller and the Indenture Trustee by any Series Enhancer or any Noteholders, a written notice specifying such default or breach and requiring it to be remedied, provided, however, that if the Issuer is diligently attempting to effect such cure at the end of such sixty (60) day period, the Issuer shall be entitled to an additional sixty (60) day period in which to complete such cure; or (b) any representation or warranty of the Issuer made in any of the Transaction Documents or in any certificate or other writing delivered pursuant hereto or thereto or in connection herewith with respect to or affecting any Outstanding Notes shall prove to be inaccurate in any respect which materially and adversely affects the interests of any Noteholder or any Series Enhancer (if such Series Enhancer is then the Control Party for a Series of Outstanding Notes or shall have made an unreimbursed payment on its Enhancement Agreement) as of the time when the same shall have been made, and such inaccuracy, if curable, continues for sixty (60) days after the date on which there has been given to the Issuer by the Indenture Trustee, or to the Issuer and the Indenture Trustee by any Series Enhancer or any Noteholders, a written notice specifying such inaccuracy and requiring it to be remedied, provided, however, that if such inaccuracy is capable of cure and the Issuer is diligently attempting to effect such cure at the end of such sixty (60) day period, the Issuer shall be entitled to an additional sixty (60) day period in which to complete such cure;

 

(6)

an involuntary case is commenced under the Bankruptcy Code against the Issuer and the petition is not controverted within 10 days, or is not dismissed within 60 days, after commencement of the case, or a decree or order for relief by a court having jurisdiction in respect of the Issuer is entered appointing a receiver, liquidator, assignee, custodian, trustee, or sequestrator (or other similar official) for the Issuer or for any substantial part of its properties, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of sixty (60) consecutive days;

 

(7)

the commencement by the Issuer of a voluntary case under any applicable Insolvency Law, or other similar law now or hereafter in effect, or the consent by the Issuer to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee or sequestrator (or other similar official) of the Issuer, or any substantial part of its properties, or the making by the Issuer of any general assignment for the benefit of creditors, or the failure by the Issuer generally to pay its debts as they become due, or the taking of corporate action by the Issuer in furtherance of any such action;

 

(8)

as of any date of determination, the Aggregate Note Principal Balance shall exceed the sum of (A) the product of (i) one hundred percent (100%) and (ii) the Aggregate Net Book Value, plus (B) the product of (i) one hundred percent (100%) and (ii) the then current balance on deposit in the Restricted Cash Account, plus (C) one hundred percent (100%) of up to the Receivables Threshold of the unpaid balance of any receivables resulting from the sale or other disposition of one or more Eligible Containers that were either owned by

 

 

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the Issuer or subject to a Finance Lease for which the Issuer is the lessor, so long as such receivables are not then outstanding for more than sixty (60) days (measured from the issue date of such receivables);

 

(9)

the occurrence of a contribution failure with respect to a Plan maintained by Issuer or an ERISA Affiliate of the Issuer, which contribution failure is sufficient to give rise to a lien under Section 302(f) of ERISA; or

 

(10)

the Indenture Trustee shall fail to have a first priority perfected security interest under the laws of the United States in any material portion of the Collateral (other than as a result of a Permitted Encumbrance) and such condition continues for fifteen (15) days without being cured or waived by each Control Party unless such failure to have a first priority perfected security interest is due to any act or omission of the Indenture Trustee or the Noteholders;

 

(11)

the Issuer is required to register as an investment company under the Investment Company Act of 1940, as amended;

 

(12)

the rendering against the Issuer of a final, non-appealable judgment, decree or order for the payment of money in excess of One Million Dollars ($1,000,000), (to the extent not paid when due or covered by a reputable and solvent insurance company, with any portion of such judgment, decree or order not so paid or not so covered, as applicable, to be included in the determination of the dollar amount specified in this clause (12)) which judgment, decree or order results in a claim that would entitle the claimholder to petition for the involuntary bankruptcy of the Issuer under the Bankruptcy Code, and the continuance of such judgment, decree or order for a period of 60 consecutive days;

 

(13)

all of the following shall have occurred: (A) a Manager Default shall have occurred and be continuing, (B) the Requisite Global Majority shall have delivered the Manager Termination Notice to the Manager in accordance with the terms of the Management Agreement and (C) a replacement Manager has not assumed the duties of the terminated Manager within the earlier of (i) ninety (90) days, if on such 90th day or any day thereafter there exists an Asset Base Deficiency, or (ii) one hundred twenty (120) days at all times not covered by clause (i); in each case measured from the date of such Manager Termination Notice; or

 

(14)

the occurrence of any event or condition specified as an Event of Default in a Supplement.

The occurrence of an Event of Default with respect to one Series of Notes, except to the extent waived by the related Control Party for such Series of Notes, shall constitute an Event of Default with respect to all other Series of Notes then Outstanding unless the related Supplement with respect to each such Series of Notes shall specifically provide to the contrary.

Section 802. Acceleration of Stated Maturity; Rescission and Annulment. (a) Upon the occurrence of an Event of Default of the type described in paragraph (6) or (7) of Section 801, the unpaid principal balance of, and accrued interest on, all Series of Notes, together with all other amounts then due and owing to the Noteholders, each Series Enhancer and each Hedge Counterparty, shall become immediately due and payable without further action by any Person. Except as set forth in the immediately preceding sentence, if an Event of Default under Section 801 occurs and is continuing, then and in every

 

 

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such case the Indenture Trustee shall at the direction of the Requisite Global Majority declare the principal of and accrued interest on all Notes of all Series then Outstanding to be due and payable immediately, by a notice in writing to the Issuer and to the Indenture Trustee given by the Requisite Global Majority, and upon any such declaration such principal and accrued interest shall become immediately due and payable.

(b) At any time after such a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Indenture Trustee as hereinafter in this Article provided, the Requisite Global Majority, in its sole discretion, by written notice to the Issuer and the Indenture Trustee, may rescind and annul such declaration and its consequences if:

(i) the Issuer has paid or deposited with the Indenture Trustee a sum sufficient to pay:

(A) all of the installments of interest and, if the Legal Final Maturity Date has occurred with respect to any Series, principal of all Notes of such Series, in each case to the extent such amounts were overdue prior to the date of such acceleration;

(B) to the extent that payment of such interest is lawful, interest at the Default Rate on the amounts set forth in clause (A) above;

(C) all unpaid Indenture Trustee’s Fees and sums paid or advanced by the Indenture Trustee hereunder or by the Manager and the reasonable and documented compensation, out-of-pocket expenses, disbursements and advances of the Indenture Trustee, its agents and counsel incurred in connection with the enforcement of this Indenture;

(D) all amounts due to each Series Enhancer; and

(E) all scheduled payments due under any Hedge Agreement, together with interest thereon in accordance with the terms thereof; and

(ii) all Events of Default, other than the nonpayment of the principal of or interest on Notes which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 813 hereof.

No such rescission with respect to any Event of Default shall affect any subsequent Event of Default or impair any right consequent thereon, nor shall any such rescission affect any Hedge Agreement which has been terminated in accordance with its terms.

Section 803. Collection of Indebtedness. The Issuer covenants that, if an Event of Default occurs and is continuing and a declaration of acceleration has been made under Section 802 and not rescinded, the Issuer will, upon demand of the Indenture Trustee, pay to the Indenture Trustee, for the benefit of the Noteholders of all Series then Outstanding, all Hedge Counterparties and all Series Enhancers, an amount equal to the whole amount then due and payable on all Series of Notes for principal and interest, with interest upon the overdue principal and, to the extent that payment of such interest shall be legally enforceable, upon overdue installments of interest, at the Default Rate payable with respect to each such Note and, in addition thereto, such further amount as shall be sufficient to cover all other Outstanding Obligations, the costs and out-of-pocket expenses of collection, including the reasonable and documented compensation, expenses, disbursements and advances of the Indenture Trustee and the Requisite Global Majority, their respective agents and counsel incurred in connection with the enforcement of this Indenture.

 

 

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Section 804. Remedies. If an Event of Default occurs and is continuing, the Indenture Trustee, by such officer or agent as it may appoint, shall notify each Noteholder, each Eligible Hedge Counterparty, the Administrative Agent, each Series Enhancer and the applicable Rating Agencies, if any, of such Event of Default. So long as an Event of Default is continuing or at any time after a declaration of acceleration has been made, the Indenture Trustee shall if instructed by the Requisite Global Majority:

(i) institute any Proceedings, in its own name and as trustee of an express trust, for the collection of all amounts then due and payable on the Notes of all Series under this Indenture or the related Supplement with respect thereto, whether by declaration or otherwise, enforce any judgment obtained, and collect from the Collateral and any other assets of the Issuer any monies adjudged due;

(ii) subject to the quiet enjoyment rights of any lessee of a Managed Container, sell (including any sale made in accordance with Section 816 hereof), hold or lease the Collateral or any portion thereof or rights or interest therein, at one or more public or private transactions conducted in any manner permitted by law;

(iii) institute any Proceedings from time to time for the complete or partial foreclosure of the Lien created by this Indenture with respect to the Collateral;

(iv) institute such other appropriate Proceedings to protect and enforce any other rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy;

(v) exercise any remedies of a secured party under the Uniform Commercial Code or any applicable law and take any other appropriate action to protect and enforce the rights and remedies of the Indenture Trustee or the Noteholders hereunder; and

(vi) appoint a receiver or a manager over the Issuer or its assets.

Section 805. Indenture Trustee May Enforce Claims Without Possession of Notes.

(a) In all Proceedings brought by the Indenture Trustee (and also any Proceedings involving the interpretation of any provision of this Indenture to which the Indenture Trustee shall be a party), the Indenture Trustee shall be held to represent all of the Noteholders, and it shall not be necessary to make any Noteholder a party to any such Proceedings.

(b) All rights of action and claims under this Indenture, the related Supplement or any of the Notes may be prosecuted and enforced by the Indenture Trustee without the possession of such Notes or the production thereof in any Proceeding relating thereto, and any such Proceeding instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery whether by judgment, settlement or otherwise shall, after provision for the payment of the reasonable compensation, expenses, and disbursements incurred and advances made, by the Indenture Trustee, its agents and counsel, be for the ratable benefit of the Noteholders of the Notes, subject to the subordination of payments among Classes of a particular Series as set forth in the related Supplement for such Series.

 

 

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Section 806. Allocation of Money Collected. If the Notes of all Series have been declared due and payable following an Event of Default and such declaration and its consequences have not been rescinded or annulled, any money collected by the Indenture Trustee pursuant to this Article or otherwise and any other monies that may be held or thereafter received by the Indenture Trustee as security for such Notes and the obligations secured hereby shall be applied, to the extent permitted by law, in the following order, at the date or dates fixed by the Indenture Trustee by wire transfer of immediately available funds:

 

(1)

To the Indenture Trustee, all the Indenture Trustee’s Fees then due and payable for all Series then Outstanding subject to the per annum dollar limitation in Section 905, plus any costs incurred by the Indenture Trustee in enforcing any of the rights of the Indenture Trustee or the Noteholders hereunder or under any of the other Transaction Documents;

 

(2)

To the Administrative Agent, the Administrative Agent Fees then due and payable;

 

(3)

To the Manager, an amount equal to the sum of: (i) the Management Fee then due and payable, (ii) the amount of any Management Fee Arrearage, and (iii) any Excess Deposit then due and payable, but in each case only to the extent not previously withheld by the Manager in accordance with the terms of the Transaction Documents;

 

(4)

To the Manager, the reimbursement for any Manager Advances;

 

(5)

To the Persons entitled thereto: (i) auditing, accounting and related fees then due and payable which are classified as an Issuer Expense, and (ii) any other Issuer Expenses, so long as the aggregate amount paid pursuant to this clause (5) in any calendar year would not exceed Five Hundred Thousand Dollars ($500,000);

 

(6)

To each Series Enhancer, on a pro rata basis, based on the amount of Premiums then due and payable, the amount of any Premium then due and payable pursuant to the terms of each applicable Enhancement Agreement;

 

(7)

To each of the following on a pro rata basis: (i) to each Series Account for each Series of Notes then Outstanding, an amount equal to the Priority Payments for each such Series and (ii) to each Hedge Counterparty, the amount of any scheduled payments (but excluding termination payments then due and payable) pursuant to the terms of any Hedge Agreement then in effect. If sufficient funds do not exist to pay in full all such Priority Payments, such amounts shall be allocated among all Series of Notes in the same proportion as the ratio of (x) the Priority Payments of a particular Series of Notes then Outstanding on such Payment Date to (y) the sum of the Priority Payments for all Series of Notes then Outstanding at such Payment Date;

 

(8)

To pay each of the amounts set forth in clause (i) and (ii) on a pro rata and a pari passu basis (based on amounts then due): (i) to each Series Account, the then unpaid principal balance of the related Notes (pro rata based on the amounts unpaid on the date on which such Event of Default first occurs) (including Reimbursement Amounts payable in respect thereof to the Series Enhancer), and (ii) to each Hedge Counterparty, the remaining amounts then due and payable under the related Hedge Agreement (excluding termination payments resulting from the breach of the applicable Hedge Agreement by such Hedge Counterparty), until such amounts are paid in full;

 

 

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(9)

To each of the following on a pro rata basis: to the Series Account for each Series of Notes then Outstanding, an amount equal to all other amounts then due and payable to the Noteholders of such Series and the related Series Enhancer, if any, including, without limitation, Default Fees, increased costs, taxes and indemnity payments identified in the related Supplement;

 

(10)

To each Hedge Counterparty, on a pro rata basis, all remaining amounts then due and owing (after giving effect to the amounts paid pursuant to clauses (7) and (8) above);

 

(11)

To the Indenture Trustee, any Indenture Trustee’s Fees then due and payable, after giving effect to the payment made pursuant to clause (1) above but not subject to the per annum dollar limitation in Section 905;

 

(12)

To the Issuer, the amount of any indemnity payments payable to the officers, directors and/or managers of the Issuer required to be made by the Issuer;

 

(13)

To the Manager, the amount of any officer and director indemnity payments required to be made by the Manager; and

 

(14)

To the Issuer, any remaining monies which may, any provision in the Transaction Documents to the contrary notwithstanding, be used by the Issuer for any purpose, including, without limitation, general corporate purposes, the distribution of dividends, repayment of debt, paying fees and expenses or any other purpose in the sole discretion of the Issuer.

Section 807. Limitation on Suits. Except to the extent provided in Section 808 hereof, no Noteholder shall have the right to institute any Proceeding, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless:

(i) such Noteholder has previously given written notice to the Indenture Trustee of a continuing Event of Default;

(ii) the Requisite Global Majority shall have made written request to the Indenture Trustee to institute Proceedings in respect of such Event of Default in its own name as Indenture Trustee hereunder;

(iii) such Noteholder or Noteholders have offered to the Indenture Trustee reasonable security or indemnity satisfactory to it against the costs, expenses and liabilities to be incurred in compliance with such request;

(iv) the Indenture Trustee has, for thirty (30) days after its receipt by a Responsible Officer of such notice, request and offer of security or indemnity, failed to institute any such Proceeding; and

(v) no direction inconsistent with such written request has been given to the Indenture Trustee during such thirty (30) day period by the Requisite Global Majority;

it being understood and intended that no one or more Noteholders shall have any right in any manner whatsoever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Noteholder, or to obtain or to seek to obtain priority or preference over any other Noteholder (except to the extent provided in the related Supplement) or to enforce any right under this

 

 

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Indenture, except in the manner herein provided and for the benefit of all Noteholders. Notwithstanding anything to the contrary in this Section 807, if a Series Enhancer is the Control Party for a Series of Outstanding Notes, then the Noteholders of such Series may not institute any Proceeding with respect to this Indenture, or for the appointment of a receiver or trustee for the Issuer, or for any other reason hereunder without the prior written consent of such Series Enhancer.

Section 808. Unconditional Right of Noteholders to Receive Principal, Interest and Commitment Fees. Notwithstanding any other provision of this Indenture, each Noteholder shall have the right, which is absolute and unconditional, to receive payment of the principal of, interest on and commitment fees in respect of such Note as such principal, interest and commitment fees become due and payable in accordance with the provisions of this Indenture and the related Supplement and to institute any Proceeding for the enforcement of such payment, and such rights shall not be impaired without the consent of such Noteholder.

Section 809. Restoration of Rights and Remedies. If the Indenture Trustee, any Series Enhancer or any Noteholder has instituted any Proceeding to enforce any right or remedy under this Indenture or the related Supplement and such Proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Indenture Trustee, such Series Enhancer or to such Noteholder, then and in every such case, subject to any determination in such Proceeding, the Issuer, the Indenture Trustee, such Series Enhancer and the Noteholders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Indenture Trustee, such Series Enhancer and the Noteholders shall continue as though no such Proceeding had been instituted.

Section 810. Rights and Remedies Cumulative. No right or remedy conferred upon or reserved to the Indenture Trustee, any Series Enhancer, any Hedge Counterparty or to the Noteholders pursuant to this Indenture or any Supplement is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

Section 811. Delay or Omission Not Waiver. No delay or omission of the Indenture Trustee, of any Series Enhancer, of any Hedge Counterparty or of any Noteholder to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Indenture Trustee, any Hedge Counterparty, any Series Enhancer or to the Noteholders may be exercised from time to time, and as often as may be deemed expedient, by the Indenture Trustee, by any Series Enhancer, by any Hedge Counterparty or by the Noteholders, as the case may be.

Section 812. Control by Requisite Global Majority.

(a) Upon the occurrence of an Event of Default, the Requisite Global Majority shall have the right to direct the time, method and place of conducting any Proceeding for any remedy available to the Indenture Trustee or exercising any trust or power conferred on the Indenture Trustee, provided that (i) such direction shall not be in conflict with any rule of law or with this Indenture, including, without limitation, Section 804 hereof and (ii) the Indenture Trustee may take any other action deemed proper by the Indenture Trustee which is not inconsistent with such direction.

(b) Notwithstanding the grant of a security interest to secure the Outstanding Obligations owing to the Indenture Trustee, for the benefit of the Noteholders, each Series Enhancer and each Hedge Counterparty, all rights to direct actions or to exercise rights or remedies under this Indenture or the UCC (including these set forth in Section 804 hereof) shall be vested solely in the Requisite Global

 

 

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Majority and, by accepting the benefits of this Indenture, each Noteholder and Hedge Counterparty acknowledges such statement; provided, however, that nothing contained in this paragraph shall constitute a modification of Section 808, Section 813(b) or Section 816(d) hereof.

Section 813. Waiver of Past Defaults. (a) The Requisite Global Majority may, on behalf of all Noteholders of all Series, waive any past Event of Default and its consequences, except an Event of Default:

(i) in the payment of (x) the principal balance of any Note on the Legal Final Maturity Date of such Note, (y) interest on any Note of any Series on any Payment Date, or (z) commitment fees in respect of any Note of any Series on any Payment Date, all of which defaults can be waived solely by the affected Noteholders and affected Series Enhancers; or

(ii) in respect of a covenant or provision hereof which cannot be modified or amended without the consent of all of the Noteholders and Series Enhancers, as applicable, affected thereby pursuant to Section 1002 of this Indenture.

(b) Upon any such waiver, such Event of Default shall cease to exist and shall be deemed to have been cured and not to have occurred for every purpose of this Indenture; provided, however, that no such waiver shall extend to (i) any subsequent or other Event of Default or impair any right consequent thereon or (ii) affect any Hedge Agreement which has been terminated in accordance with its terms.

Section 814. Undertaking for Costs. All parties to this Indenture agree, and each Noteholder by acceptance of a Note shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Indenture Trustee for any action taken, suffered or omitted by it as the Indenture Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; provided, however, that the provisions of this Section shall not apply to any suit instituted by the Indenture Trustee, to any suit instituted by any Noteholder, or group of Noteholders, holding in the aggregate more than ten percent (10%) of the aggregate principal balance of the Notes of all Series then Outstanding, or to any suit instituted by any Noteholder for the enforcement of the payment of the principal of or interest on any Note on or after the Legal Final Maturity Date of such Note.

Section 815. Waiver of Stay or Extension Laws. The Issuer covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Indenture Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

Section 816. Sale of Collateral.

(a) The power to effect any sale (a “Sale”) of any portion of the Collateral pursuant to Section 804 hereof shall not be exhausted by any one or more Sales as to any portion of the Collateral remaining unsold, but shall continue unimpaired until the entire Collateral shall have been sold or all Outstanding Obligations shall have been paid in full. The Indenture Trustee at the direction of the Requisite Global Majority may from time to time postpone any Sale by public announcement made at the time and place of such Sale.

 

 

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(b) Upon any Sale, whether made under the power of sale hereby given or under judgment, order or decree in any Proceeding for the foreclosure or involving the enforcement of this Indenture: (i) the Indenture Trustee, at the written direction of the Requisite Global Majority, may bid for and purchase the property being sold, and upon compliance with the terms of such Sale may hold, retain and possess and dispose of such property in accordance with the terms of this Indenture; and (ii) the receipt of the Indenture Trustee or of any officer thereof making such Sale shall be a sufficient discharge to the purchaser or purchasers at such Sale for its or their purchase money, and such purchaser or purchasers, and its or their assigns or personal representatives, shall not, after paying such purchase money and receiving such receipt of the Indenture Trustee or of such officer therefor, be obliged to see to the application of such purchase money or be in any way answerable for any loss, misappropriation or non-application thereof.

(c) The Indenture Trustee shall execute and deliver an appropriate instrument of conveyance provided to it transferring its interest in any portion of the Collateral in connection with a Sale thereof. In addition, the Indenture Trustee is hereby irrevocably appointed the agent and attorney-in-fact of the Issuer to transfer and convey its interest (subject to lessees’ rights of quiet enjoyment) in any portion of the Collateral in connection with a Sale thereof, and to take all action necessary to effect such Sale. No purchaser or transferee at such a Sale shall be bound to ascertain the Indenture Trustee’s authority, inquire into the satisfaction of any conditions precedent or see to the application of any monies.

(d) The Indenture Trustee acknowledges that its right to sell, transfer or otherwise convey any Hedge Agreement or any transaction outstanding thereunder, or to exercise foreclosure rights with respect thereto shall be subject to compliance with the provisions of the applicable Hedge Agreement.

Section 817. Action on Notes. The Indenture Trustee’s right to seek and recover judgment on the Notes or under this Indenture or any Supplement shall not be affected by the seeking, obtaining or application of any other relief under or with respect to this Indenture or any Supplement. Neither the Lien of this Indenture nor any rights or remedies of the Indenture Trustee, any Series Enhancer, any Hedge Counterparty or the Noteholders shall be impaired by the recovery of any judgment by the Indenture Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Collateral or upon any of the assets of the Issuer.

ARTICLE IX

CONCERNING THE INDENTURE TRUSTEE

Section 901. Duties of the Indenture Trustee. The Indenture Trustee, prior to the occurrence of an Event of Default or after the cure or waiver of any Event of Default that may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and any Supplement and no implied duties shall be inferred against it. If an Event of Default has occurred and is continuing, the Indenture Trustee, at the written direction of the Requisite Global Majority, shall exercise such of the rights and powers vested in it by this Indenture and the related Supplements, and use the same degree of care and skill in its exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person’s own affairs.

 

 

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The Indenture Trustee, upon receipt of all resolutions, certificates, statements, opinions, reports, documents, orders or other instruments furnished to the Indenture Trustee which are specifically required to be furnished pursuant to any provisions of this Indenture and any applicable Supplement, shall determine whether they are substantially in the form required by this Indenture and any applicable Supplement; provided, however, that the Indenture Trustee shall not be responsible for the accuracy or content (including mathematical calculations) of any such resolution, certificate, statement, opinion, report, document, order or other instrument furnished pursuant to this Indenture and any applicable Supplement.

No provision of this Indenture or any Supplement shall be construed to relieve the Indenture Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct; provided, however, that:

(i) Prior to the occurrence of an Event of Default and after the cure or waiver of any Event of Default that may have occurred, the duties and obligations of the Indenture Trustee shall be determined solely by the express provisions of this Indenture and any Supplements. The Indenture Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture and any Supplements, and no implied covenants or obligations shall be read into this Indenture against the Indenture Trustee and, in the absence of bad faith on the part of the Indenture Trustee, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates, statements, reports, documents, orders, opinions or other instruments (whether in their original or facsimile form) furnished to the Indenture Trustee and conforming to the requirements of this Indenture and any Supplements (and is entitled to rely on the accuracy of any mathematical calculation or other facts stated therein);

(ii) The Indenture Trustee shall not be liable for an error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Indenture Trustee, unless it shall be proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; and

(iii) The Indenture Trustee shall not be personally liable with respect to any action taken, suffered or omitted to be taken by it in good faith in accordance with the direction of the Requisite Global Majority relating to the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred upon the Indenture Trustee, under this Indenture.

No provision of this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate security or indemnity against such risk or liability is not reasonably assured to it (the unsecured indemnity of each Series Enhancer (so long as its claims paying ability is rated “AAA” or “Aaa”, as applicable) upon such terms as may be reasonably acceptable to the Indenture Trustee being deemed satisfactory for such purpose).

Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Indenture Trustee shall be subject to the provisions of this Section 901.

 

 

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Section 902. Certain Matters Affecting the Indenture Trustee. Except as otherwise provided in Section 901 hereof:

(i) The Indenture Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any Opinion of Counsel, certificate of an officer of the Issuer or the Manager, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, bond or other paper or document (whether in its original or facsimile form) reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties;

(ii) The Indenture Trustee may consult with counsel of its selection and any advice or opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance in reliance therewith;

(iii) The Indenture Trustee shall be under no obligation to institute, conduct or defend any litigation or proceeding hereunder or in relation hereto at the request, order or direction of the Requisite Global Majority, pursuant to the provisions of this Indenture, unless the Indenture Trustee shall have security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities which may be incurred therein or thereby (the unsecured indemnity of each Series Enhancer (so long as its claims paying ability is rated “AAA” or “Aaa”, as applicable) being deemed satisfactory for such purpose);

(iv) The Indenture Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture;

(v) The Indenture Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond or other paper or document, unless requested in writing to do so by the Control Party for any Series; provided, however, that the Indenture Trustee may require reasonable security or indemnity satisfactory to it against any cost, expense or liability likely to be incurred in making such investigation as a condition to so proceeding (the unsecured indemnity of each Series Enhancer (so long as its claims paying ability is rated “AAA” or “Aaa”, as applicable) upon such terms as may be reasonably acceptable to the Indenture Trustee being deemed satisfactory for such purpose). The reasonable expense of any such examination shall be paid, on a pro rata basis, by the Noteholders of the applicable Series requesting such examination or, if paid by the Indenture Trustee, shall be reimbursed by such Noteholders upon demand;

(vi) The Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its agents or attorneys and the Indenture Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed by it with due care hereunder;

(vii) The Indenture Trustee shall not be charged with knowledge of any Default, Event of Default or Early Amortization Event unless either a Responsible Officer of the Indenture Trustee shall have actual knowledge thereof or written notice of such shall have been actually received by a Responsible Officer of the Indenture Trustee; and

(viii) The rights, privileges, protections, immunities and benefits given to the Indenture Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Indenture Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act on behalf of the Indenture Trustee hereunder.

 

 

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The provisions of this Section 902 shall be applicable to the Indenture Trustee in its capacity as the Note Registrar under this Indenture.

Section 903. Indenture Trustee Not Liable. (a) The recitals contained herein (other than the representations and warranties contained in Section 911 hereof), in any Supplement and in the Notes (other than the certificate of authentication on the Notes) shall be taken as the statements of the Issuer, and the Indenture Trustee assumes no responsibility for their correctness. The Indenture Trustee makes no representations as to the validity or sufficiency of this Indenture, any Supplement, the Notes, the Collateral or of any related document; provided that this sentence shall not limit the representations and warranties made by the Indenture Trustee in Section 911. The Indenture Trustee shall not be accountable for the use or application by the Issuer of the proceeds of any Series or Class of Notes, or for the use or application of any funds paid to the Issuer or the Manager in respect of the Collateral.

(b) The Indenture Trustee shall have no responsibility or liability for or with respect to the existence or validity of any Collateral the perfection of any security interest (whether as of the date hereof or at any future time), the maintenance of or the taking of any action to maintain such perfection, the validity of the assignment of any portion of the Collateral to the Indenture Trustee or of any intervening assignment, the compliance by the Seller or the Manager with any covenant or the breach by the Seller or the Manager of any warranty or representation made hereunder, in any Supplement or in any related document or the accuracy of such warranty or representation, any investment of monies in the Trust Account, the Restricted Cash Account or any Series Account or any loss resulting therefrom (provided that such investments are made in accordance with the provisions of Section 303 hereof), or the acts or omissions of the Seller or the Manager taken in the name of the Indenture Trustee.

(c) Except as expressly provided herein or in any Supplement, the Indenture Trustee shall not have any obligation or liability under any Contract by reason of or arising out of this Indenture or the granting of a security interest in such Contract hereunder or the receipt by the Indenture Trustee of any payment relating to any Contract pursuant hereto, nor shall the Indenture Trustee be required or obligated in any manner to perform or fulfill any of the obligations of the Issuer, the Seller or the Manager under or pursuant to any Contract, or to make any payment, or to make any inquiry as to the nature or the sufficiency of any payment received by it, or the sufficiency of any performance by any party, under any Contract.

Section 904. Indenture Trustee May Own Notes. Subject to compliance with subsection (a)(4)(i) of Rule 3a-7 under the Investment Company Act of 1940, the Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Notes with the same rights it would have if it were not the Indenture Trustee.

Section 905. Indenture Trustee’s Fees and Expenses. The fees, expenses, disbursements and advances of the Indenture Trustee shall be paid only by the Issuer in accordance with Section 302 or 806 hereof. The Issuer shall indemnify the Indenture Trustee (and any predecessor Indenture Trustee) and each of its officers, directors and employees for, and hold them harmless against, any loss, liability, damage claim or expense incurred without negligence or willful misconduct on their part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself both individually and in its representative capacity against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder (together with the fees, expenses, disbursements and advances of the Indenture Trustee, “Indenture Trustee Fees”); provided however, that the Indenture Trustee’s Fees payable pursuant to clauses (c)(I)(1) and (c)(II)(1) in Section 302 or Section 806 hereof shall not exceed One Hundred Thousand Dollars ($100,000) per annum.

 

 

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The obligations of the Issuer under this Section 905 to compensate the Indenture Trustee, and to indemnify and hold harmless, the Indenture Trustee shall constitute Outstanding Obligations hereunder and shall survive the resignation or removal of the Indenture Trustee and the satisfaction and discharge of this Indenture.

When the Indenture Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 801(4) or Section 801(5), the expenses and the compensation for the services are intended to constitute expenses of administration under any bankruptcy law.

Section 906. Eligibility Requirements for the Indenture Trustee. The Indenture Trustee hereunder shall at all times be a national banking association or a corporation, organized and doing business under the laws of the United States of America or any State, and authorized under such laws to exercise corporate trust powers. In addition, the Indenture Trustee or its parent corporation shall at all times (i) have a combined capital and surplus of at least $50,000,000, (ii) be subject to supervision or examination by Federal or state authority, (iii) have (A) in the case of U.S. Bank National Association, a long-term unsecured debt rating of “A-2” or better by Moody’s and “A” or better by S&P or (B) in all other instances, a long-term unsecured senior debt rating of “A-2” or better by Moody’s and a long-term unsecured senior debt rating of “A” or better by S&P and short-term unsecured senior debt rating of “P-1” or better by Moody’s and a short-term unsecured senior debt rating of “A-2” or better by S&P; provided that with respect to a successor Indenture Trustee, clauses (i), (ii) and (iii) shall not apply if, as of the date on which the successor Indenture Trustee is appointed, such successor Indenture Trustee is acceptable to the Requisite Global Majority and each Hedge Counterparty. The Indenture Trustee shall at all times satisfy the requirements of subsection (a)(4)(i) of Rule 3a-7 of the Investment Company Act of 1940. If the Indenture Trustee publishes reports of condition at least annually, pursuant to law or to the requirements of such supervising or examining authority, then, for the purposes of this Section 906, the combined capital and surplus of the Indenture Trustee shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Indenture Trustee shall cease to be eligible in accordance with the provisions of this Section, the Indenture Trustee shall resign promptly in the manner and with the effect specified in Section 907 hereof.

Section 907. Resignation and Removal of the Indenture Trustee. The Indenture Trustee may at any time resign and be discharged from the trusts hereby created by giving written notice thereof to the Issuer, the Manager, the Administrative Agent, each Series Enhancer and the Noteholders. Upon receiving such notice of resignation, the Issuer, at the direction and subject to the consent of the Requisite Global Majority, shall promptly appoint a successor trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the resigning Indenture Trustee, each Eligible Hedge Counterparty, the Administrative Agent, each Series Enhancer, and one copy to the successor Indenture Trustee. If no successor Indenture Trustee shall have been so appointed and have accepted appointment within thirty (30) days after the giving of such notice of resignation, the Requisite Global Majority may appoint a successor Indenture Trustee or, if it does not do so within thirty (30) days after the end of such thirty (30) day period, the resigning Indenture Trustee may petition at the expense of the Issuer any court of competent jurisdiction for the appointment of a successor Indenture Trustee, which successor trustee shall meet the eligibility standards set forth in Section 906.

If at any time (i) the Indenture Trustee shall cease to be eligible in accordance with the provisions of Section 906 hereof and shall fail to resign after written request therefor by the Issuer, at the direction of the Requisite Global Majority, or (ii) if at any time the Indenture Trustee shall become incapable of acting, or (iii) shall be adjudged a bankrupt or insolvent, or a receiver of the Indenture Trustee, or of its property shall be appointed, or any public officer shall take charge or control of the

 

 

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Indenture Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, or (iv) the Indenture Trustee shall have defaulted in the performance of its duties under this Indenture which default materially and adversely affects the interest of any Noteholder or Series Enhancer (if such Series Enhancer is then the Control Party for a Series of Outstanding Notes) and, if curable, continues unremedied for thirty (30) days after the date on which there has been given to the Indenture Trustee by the Issuer, any Series Enhancer or any Noteholder, a written notice specifying such default or breach and requiring it to be remedied, then the Issuer, at the direction of the Requisite Global Majority, shall remove the Indenture Trustee and appoint a successor Indenture Trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the Indenture Trustee so removed and one copy to the successor Indenture Trustee.

Any resignation or removal of the Indenture Trustee and appointment of a successor Indenture Trustee pursuant to any of the provisions of this Section shall become effective upon acceptance of appointment by the successor Indenture Trustee as provided in Section 908 hereof.

Section 908. Successor Indenture Trustee. Any successor Indenture Trustee appointed as provided in Section 907 hereof shall execute, acknowledge and deliver to the Issuer and to its predecessor Indenture Trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor Indenture Trustee shall become effective and such successor Indenture Trustee, without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as the Indenture Trustee herein. The predecessor Indenture Trustee shall upon payment of all charges due it, its agents and counsel deliver to the successor Indenture Trustee all documents relating to the Collateral, if any, delivered to it, together with any amount remaining in the Trust Account, the Restricted Cash Account and any Series Accounts. In addition, the predecessor Indenture Trustee and, upon request of the successor Indenture Trustee, the Issuer shall execute and deliver such instruments and do such other things as may reasonably be required for more fully and certainly vesting and confirming in the successor Indenture Trustee all such rights, powers, duties and obligations.

No successor Indenture Trustee shall accept appointment as provided in this Section unless at the time of such acceptance such successor Indenture Trustee shall be eligible under the provisions of Section 906 hereof.

Upon acceptance of appointment by a successor Indenture Trustee as provided in this Section, the Issuer shall mail notice of the succession of such Indenture Trustee hereunder to all Noteholders at their addresses as shown in the Note Register and to each Hedge Counterparty. If the Issuer fails to mail such notice within ten (10) days after acceptance of appointment by the successor Indenture Trustee, the successor Indenture Trustee shall cause such notice to be mailed at the expense of the Issuer.

Section 909. Merger or Consolidation of the Indenture Trustee. Any Person into which the Indenture Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Indenture Trustee shall be a party, or any Person succeeding to all or substantially all of the business of the Indenture Trustee, shall be the successor of the Indenture Trustee hereunder, provided such Person shall be eligible under the provisions of Section 906 hereof, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding.

Section 910. Separate Indenture Trustees, Co-Indenture Trustees and Custodians. If the Indenture Trustee is not capable of acting outside the United States or exercising trust powers within the United States, it shall have the power from time to time to appoint (subject to satisfaction of the Rating Agency Condition, or, if no Series of Notes then has an outstanding rating, subject to the approval

 

 

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of the Administrative Agent) one or more Persons or corporations to act either as co-trustees jointly with the Indenture Trustee, or as separate trustees, or as custodians, for the purpose of holding title to, foreclosing or otherwise taking action with respect to any of the Collateral, when such separate trustee or co-trustee is necessary or advisable under any applicable laws or for the purpose of otherwise conforming to any legal requirement, restriction or condition in any applicable jurisdiction. The separate trustees, co-trustees, or custodians so appointed shall be trustees, co-trustees, or custodians for the benefit of all Noteholders, each Hedge Counterparty and each Series Enhancer and shall have such powers, rights and remedies as shall be specified in the instrument of appointment; provided, however, that no such appointment shall, or shall be deemed to, constitute the appointee an agent of the Indenture Trustee. The Issuer shall join in any such appointment, but such joining shall not be necessary for the effectiveness of such appointment.

Every separate trustee, co-trustee and custodian shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions:

(i) all powers, duties, obligations and rights conferred upon the Indenture Trustee in respect of the receipt, custody and payment of monies shall be exercised solely by the Indenture Trustee;

(ii) all other rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed upon and exercised or performed by the Indenture Trustee and such separate trustee, co-trustee, or custodian jointly, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Collateral or any portion thereof in any such jurisdiction) shall be exercised and performed by such separate trustee, co-trustee or custodian;

(iii) no trustee or custodian hereunder shall be personally liable by reason of any act or omission of any other trustee or custodian hereunder; and

(iv) the Issuer or the Indenture Trustee may at any time accept the resignation of or remove any separate trustee, co-trustee or custodian so appointed by it or them if such resignation or removal does not violate the other terms of this Indenture.

Any notice, request or other writing given to the Indenture Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee, co-trustee, or custodian shall refer to this Indenture and the conditions of this Article. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Indenture Trustee or separately, as may be provided therein, subject to all the provisions of this Indenture, specifically including every provision of this Indenture relating to the conduct of, affecting the liability of, or affording protection to, the Indenture Trustee. Every such instrument shall be furnished to the Indenture Trustee, each Hedge Counterparty and each Series Enhancer.

Any separate trustee, co-trustees, or custodian may, at any time, constitute the Indenture Trustee, its agent or attorney-in-fact, with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Indenture on its behalf and in its name. If any separate trustee, co-trustee, or custodian shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Indenture Trustee, to the extent permitted by law, without the appointment of a new or successor trustee or custodian.

 

 

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No separate trustee, co-trustee or custodian hereunder shall be required to meet the terms of eligibility as a successor Indenture Trustee under Section 906 hereof and no notice to Noteholders of the appointment thereof shall be required under Section 908 hereof.

The Indenture Trustee agrees to instruct the co-trustees, if any, to the extent necessary to fulfill the Indenture Trustee’s obligations hereunder.

Section 911. Representations and Warranties. The Indenture Trustee hereby represents and warrants as of the Closing Date of each Series that:

(a) Organization and Good Standing. The Indenture Trustee is a national association duly organized, validly existing and in good standing under the laws of the United States of America, and has the power to own its assets and to transact the business in which it is presently engaged;

(b) Authorization. The Indenture Trustee has the power, authority and legal right to execute, deliver and perform this Indenture and each Supplement and to authenticate the Notes, and the execution, delivery and performance of this Indenture and each Supplement and the authentication of the Notes has been duly authorized by the Indenture Trustee by all necessary corporate action;

(c) Binding Obligations. Each of this Indenture and each Supplement, assuming due authorization, execution and delivery by the Issuer, constitutes the legal, valid and binding obligations of the Indenture Trustee, enforceable against the Indenture Trustee in accordance with its terms, except that (i) such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws (whether statutory, regulatory or decisional) now or hereafter in effect relating to creditors’ rights generally and the rights of trust companies in particular and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to certain equitable defenses and to the discretion of the court before which any proceeding therefor may be brought, whether in a proceeding at law or in equity;

(d) No Violation. The performance by the Indenture Trustee of its obligations under this Indenture and each Supplement will not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice, lapse of time or both) a default under, the charter documents or bylaws of the Indenture Trustee;

(e) No Proceedings. There are no proceedings or investigations to which the Indenture Trustee is a party pending, or, to the knowledge of the Indenture Trustee without independent investigation, threatened, before any court, regulatory body, administrative agency or other tribunal or Governmental Authority (A) asserting the invalidity of this Indenture or the Notes, (B) seeking to prevent the issuance of the Notes or the consummation of any of the transactions contemplated by this Indenture or (C) seeking any determination or ruling that would materially and adversely affect the performance by the Indenture Trustee of its obligations under, or the validity or enforceability of, this Indenture or the Notes; and

(f) Approvals. Neither the execution or delivery by the Indenture Trustee of this Indenture nor the consummation of the transactions by the Indenture Trustee contemplated hereby requires the consent or approval of, the giving of notice to, the registration with or the taking of any other action with respect to any Governmental Authority under any existing federal or State law governing the banking or trust powers of the Indenture Trustee.

 

 

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Section 912. Indenture Trustee Offices. The Indenture Trustee shall maintain in the State of New York an office or offices or agency or agencies where Notes may be surrendered for registration of transfer or exchange, which office currently is located at 60 Livingston Avenue, St. Paul, Minnesota 55107, and shall promptly notify the Issuer, the Manager, each Hedge Counterparty and the Noteholders of any change of such location.

Section 913. Notice of Event of Default. If a Responsible Officer of the Indenture Trustee shall have actual knowledge that an Event of Default or Early Amortization Event with respect to any Series shall have occurred and be continuing, the Indenture Trustee shall promptly (but in any event within five (5) Business Days) give written notice thereof to each Noteholder, the Administrative Agent, any Rating Agency, the Hedge Counterparty and the Series Enhancer of such Series. For all purposes of this Indenture, in the absence of actual knowledge by a Responsible Officer of the Indenture Trustee, the Indenture Trustee shall not be deemed to have actual knowledge of any Event of Default or Early Amortization Event unless notified in writing thereof by the Issuer, the Seller, the Manager, any Series Enhancer, the Administrative Agent or any Noteholder, and such notice references the applicable Series of Notes generally, the Issuer, this Indenture or the applicable Supplement.

Section 914. Notices. The Indenture Trustee shall make reasonable efforts to forward, to the Deal Agents, within five (5) Business Days of receipt thereof, copies of all notices, reports and other written communications that it delivers or receives, at the address for notices provided in the Transaction Documents, pursuant to the terms of the Transaction Documents.

 

 

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ARTICLE X

SUPPLEMENTAL INDENTURES

Section 1001. Supplemental Indentures Not Creating a New Series Without Consent of Noteholders. (a) Without the consent of any Noteholder and based on an Officer’s Certificate of the Issuer to the effect that such Supplement is for one of the purposes set forth in clauses (i) through (vii) below, the Issuer and the Indenture Trustee, at any time and from time to time, may, with the consent of each Series Enhancer if it is then the Control Party, and each affected Hedge Counterparty (provided that the consent of an Hedge Counterparty shall be required only if such proposed amendment would materially and adversely affect the rights, duties or immunities of such Hedge Counterparty under this Indenture or otherwise), enter into one or more Supplements to this Indenture for any of the following purposes:

(i) to add to the covenants of the Issuer in this Indenture for the benefit of the Noteholders of all Series of Notes then Outstanding or of any Series Enhancer, or to surrender any right or power conferred upon the Issuer in this Indenture;

(ii) to cure any ambiguity, to correct or supplement any provision in this Indenture that may be inconsistent with any other provision in this Indenture, or to make any other provisions with respect to matters or questions arising under this Indenture;

(iii) to correct or amplify the description of any property at any time subject to the Lien of this Indenture, or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subjected to the Lien of this Indenture, or to subject additional property to the Lien of this Indenture;

(iv) to add to the conditions, limitations and restrictions on the authorized amount, terms and purposes of issue, authentication and delivery of the Notes, as herein set forth, or additional conditions, limitations and restrictions thereafter to be observed by the Issuer;

(v) to convey, transfer, assign, mortgage or pledge any additional property to or with the Indenture Trustee;

(vi) to evidence the succession of the Indenture Trustee pursuant to Article IX; or

(vii) to add any additional Events of Default or Early Amortization Events.

Prior to the execution of any Supplement issued pursuant to this Section 1001, the Issuer shall provide written notice to each Rating Agency setting forth in general terms the substance of any such Supplement.

(b) Promptly after the execution by the Issuer and the Indenture Trustee of any Supplement pursuant to this Section, the Indenture Trustee shall mail to the Noteholders of all Series of Notes then Outstanding, each Rating Agency, the Administrative Agent, each Hedge Counterparty and Series Enhancer related to such Series, a notice setting forth in general terms the substance of such Supplement, together with a copy of the text of such Supplement. Any failure of the Issuer to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such Supplement.

 

 

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Section 1002. Supplemental Indentures Not Creating a New Series with Consent of Noteholders.

(a) If Section 1001 does not apply to a Supplement, then with the consent of the Requisite Global Majority and each Hedge Counterparty (provided that, in the case of each Hedge Counterparty, the consent of such Hedge Counterparty shall be required only if such proposed amendments would materially and adversely affect the Hedge Counterparty’s rights, duties or immunities under this Indenture or otherwise), the Issuer and the Indenture Trustee may enter into a Supplement hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Noteholders under this Indenture; provided, however, that no such Supplement shall, without the consent of the Noteholder of each Note adversely affected thereby and the Series Enhancer for a Series if such Series Enhancer is adversely affected thereby (but only if such Series Enhancer is then the Control Party for such Series or shall have made an unreimbursed payment on its Enhancement Agreement):

(i) reduce the principal amount of any Note, the rate of interest thereon, amend the relative priority of any such payments pursuant to Sections 302 or 806 hereof (other than to increase the priority thereof) or increase the amount of any applicable dollar limitations on amounts having a higher payment priority to such payments pursuant to Sections 302 or 806 hereof or otherwise change such payments, in each case, if in a manner adverse to the Noteholder, or change the date on which or the amount of which, or the place of payment where, or the coin or currency in which, any Note or the interest thereon, or impair the right to institute suit for the enforcement of any such payment on or after the Legal Final Maturity Date thereof;

(ii) reduce the percentage of Outstanding Notes or Existing Commitments required for (a) the consent of any Supplement to this Indenture, (b) the consent required for any waiver of compliance with certain provisions of this Indenture or certain Events of Default hereunder and their consequences as provided for in this Indenture or (c) the consent required to waive any payment default on the Notes;

(iii) modify any provision of this Indenture or any Supplement which specifies that such provision cannot be modified or waived without the consent of the Noteholder affected thereby;

(iv) in a manner adverse to such Noteholder, modify or alter the definition of the terms “Outstanding,” “Requisite Global Majority”, “Asset Base”, “Existing Commitment”, “Initial Commitment”, “Advance Rate”, “Aggregate Net Book Value” in this Indenture or any of the terms used in or necessary to interpret such terms;

(v) impair or adversely affect the Collateral in any material respect as a whole, except as otherwise permitted herein;

(vi) modify or alter Section 702(a) of this Indenture; or

(vii) permit the creation of any Lien ranking prior to or on a parity with the Lien of this Indenture with respect to any part of the Collateral or terminate the Lien of this Indenture on any property at any time subject hereto or deprive in any material respect the Noteholder of the security afforded by the Lien of this Indenture, except as otherwise permitted in this Indenture;

 

 

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provided, further, that no such Supplement shall, without the consent of each Series Enhancer adversely affected thereby, (i) reduce the amount payable to such Series Enhancer, (ii) amend the relative priority of any such payment pursuant to Sections 302 or 806 hereof (other than to increase the priority thereof) or increase the amount of any applicable dollar limitations on amounts having a higher payment priority to such payments pursuant to Sections 302 or 806 hereof or otherwise change such payments in a manner adverse to such Series Enhancer, (iii) change the date on which or the amount of which, or the place or payment where, or the coin or currency in which, such amount is paid to such Series Enhancer, (iv) increase or accelerate such Series Enhancer’s payment obligations under its Enhancement Agreement or otherwise materially and adversely affect the rights, interests or obligations of such Series Enhancer under this Indenture or the other Transaction Documents, or (v) modify provisions of any Transaction Document relating to requirements that the consent of such Series Enhancer be obtained.

Prior to the execution of any Supplement pursuant to this Section 1002, the Issuer shall provide a written notice to each Rating Agency, the Administrative Agent and each Hedge Counterparty setting forth in general terms the substance of any such Supplement.

(b) Promptly after the execution by the Issuer and the Indenture Trustee of any Supplement pursuant to this Section, the Indenture Trustee shall mail to the Noteholders of the Notes, each Rating Agency, the Administrative Agent, each Hedge Counterparty and each Series Enhancer related to such Series, a copy of the text of such Supplement. Any failure of the Indenture Trustee to mail such copy, or any defect therein, shall not, however, in any way impair or affect the validity of any such Supplement.

Section 1003. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, a Supplement permitted by this Article or the modification thereby of the trusts created by this Indenture, the Indenture Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that all conditions precedent specified in this Indenture for the execution of such Supplement have been satisfied. The Indenture Trustee may, but shall not be obligated to, enter into any such Supplement which affects the Indenture Trustee’s own rights, duties or immunities under this Indenture or otherwise.

Section 1004. Effect of Supplemental Indentures. Upon the execution of any Supplement under this Article, this Indenture shall be modified in accordance therewith, and such Supplement shall form a part of this Indenture for all purposes, and every Noteholder of Notes theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.

Section 1005. Reference in Notes to Supplemental Indentures. Notes authenticated and delivered after the execution of any Supplement pursuant to this Article may, and shall if required by the Issuer, bear a notation in form approved by the Indenture Trustee as to any matter provided for in such Supplement. If the Issuer shall so determine, new Notes so modified as to conform, in the opinion of the Indenture Trustee, may be prepared and executed by the Issuer and authenticated and delivered by the Indenture Trustee in exchange for Outstanding Notes.

Section 1006. Issuance of Series of Notes. (a) The Issuer may from time to time direct the Indenture Trustee in writing to execute and authenticate one or more Series of Notes (each, a “Series”).

(b) On or before the Series Issuance Date relating to any Series, the parties hereto will execute and deliver a Supplement which will specify the Principal Terms of such Series. The terms of such Supplement may modify or amend the terms of this Indenture solely as applied to such Series, and, with the consent of the Requisite Global Majority, may amend this Indenture as applicable to such other Series, in accordance with Section 1002 hereof. The obligation of the Indenture Trustee to authenticate,

 

 

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execute and deliver the Notes of such Series and to execute and deliver the related Supplement is subject to the satisfaction of the following conditions:

(i) on or before the Series Issuance Date, the Issuer shall have given the Indenture Trustee, the Manager, the Administrative Agent, each Rating Agency (and, if such Series is to be registered pursuant to the Securities Act, all Rating Agencies that have rated any prior Series), each Hedge Counterparty and each Series Enhancer notice of the Series and the Series Issuance Date;

(ii) the Issuer shall have delivered to the Indenture Trustee the related Supplement executed by the Issuer;

(iii) the Issuer shall have delivered to the Indenture Trustee any related Enhancement Agreement executed by each of the parties thereto and each Series Enhancer under such Enhancement Agreement shall have acknowledged in writing the terms of the Administration Agreement;

(iv) the Rating Agency Condition shall have been satisfied with respect to each Series of Notes then Outstanding for which a Rating Agency has assigned a rating;

(v) the Issuer shall have delivered to the Indenture Trustee, each Rating Agency, each Hedge Counterparty, each Series Enhancer (provided that unless such Series Enhancer is then the Control Party for a Series, although the Issuer shall deliver a copy of such Opinion of Counsel to such Series Enhancer, such Series Enhancer shall not have any right to approve the contents thereof) and, if required, any Noteholder, any Opinions of Counsel required by the related Supplement, including without limitation with respect to enforceability and security interest perfection issues;

(vi) no Early Amortization Event or Event of Default has occurred and is then continuing (or would result from the issuance of such additional Series) and that the issuance of such additional Series would not result in an Early Amortization Event or Event of Default and the Issuer shall have delivered to the Indenture Trustee an Officer’s Certificate stating the same;

(vii) such other conditions as shall be specified in the related Supplement; and

(viii) the Issuer shall have delivered to the Indenture Trustee an Officer’s Certificate that all of the conditions specified in clauses (i) through (vii) have been satisfied.

Upon satisfaction of the above conditions, the Indenture Trustee shall execute the Supplement and authenticate, execute and deliver the Notes of such Series; provided, however, that, prior to the issuance of Notes of any Series (other than the Series 2008-1 Notes), the Issuer shall receive an Opinion of Counsel (a copy of which Opinion of Counsel shall be delivered by the Issuer to the Indenture Trustee) to the effect that, for U.S. federal income tax purposes, the issuance of the Notes of such Series will not (x) adversely affect the tax characterization as debt of any outstanding Notes of any Series for which an Opinion of Counsel was rendered in connection with the original issuance of such Notes to the effect that such Notes are treated as debt for federal tax purposes and (y) such issuance will not cause the Issuer to be treated as an association (or publicly traded partnership) taxable as a corporation; and provided further that, notwithstanding any other provision of this Article, clauses (i), (iii) and (iv) of this Section shall not apply to the issuance of the initial Series of Notes or the related Supplement.

 

 

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(c) Notwithstanding any other provision of this Indenture, no Subject Notes may be issued hereunder except in a transaction or transactions (i) that are not required to be registered under the Securities Act and (ii) to the extent such issuance is not required to be so registered by reason of Regulation S under the Securities Act, that would not be required to be so registered if the interests so offered or sold were offered and sold within the United States. Any purported issuance of any Subject Notes in violation of the immediately preceding sentence shall be void to the greatest extent permitted under Applicable Law.

ARTICLE XI

NOTEHOLDERS LISTS

Section 1101. Issuer to Furnish Indenture Trustee Names and Addresses of Noteholders. Unless otherwise provided in the related Supplement, the Issuer will furnish or cause to be furnished to the Indenture Trustee and each Series Enhancer (i) not more than ten (10) days after receipt of a request from the Indenture Trustee, a list, in such form as the Indenture Trustee may reasonable require, of the names and addresses and tax identification numbers of the Noteholders as of such date, and (ii) at such other times as the Indenture Trustee may request in writing, within 30 days after the receipt by the Issuer of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; provided, however, that so long as the Indenture Trustee maintains the Note Register, no such lists shall be required to include the names and addresses received by the Indenture Trustee in such capacity; provided, further, that if the Indenture Trustee is the Note Registrar, all references in this Section to the Issuer shall be deemed to refer instead to the Indenture Trustee.

Section 1102. Preservation of Information; Communications to Noteholders. The Indenture Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Noteholders contained in the most recent list furnished to the Indenture Trustee as provided in Section 1101 and the names and addresses of Noteholders received by the Indenture Trustee in its capacity as Note Registrar. The Indenture Trustee may destroy any list furnished to it as provided in Section 1101 upon receipt of a new list so furnished.

ARTICLE XII

EARLY AMORTIZATION EVENTS

Section 1201. Early Amortization Events. As of any date of determination, the existence of any one of the following events or conditions shall constitute an Early Amortization Event:

 

(1)

The occurrence of (i) an Event of Default, or (ii) a breach by the Seller of any of its obligations under the Contribution and Sale Agreement or any other Transaction Document to which it is a party, which breach materially and adversely affects the interests of any Noteholder or Series Enhancer (if such Series Enhancer is then the Control Party for a Series of Outstanding Notes or shall have made an unreimbursed payment on its Enhancement Agreement) and which continues, if curable, for sixty (60) days after the occurrence of such breach;

 

(2)

a Manager Default shall have occurred and then be continuing;

 

(3)

if on any Payment Date, the Aggregate Note Principal Balance exceeds the Asset Base, and such condition remains unremedied for a period of thirty (30) days;

 

 

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(4)

as of any Payment Date occurring after September 30, 2008, the Issuer EBIT to Issuer Cash Interest Expense Ratio shall be less than 1.1 to 1.0;

 

(5)

as of any Payment Date, the Weighted Average Age of the Eligible Containers shall be greater than eight and one-half (8.5) years; and

 

(6)

the occurrence of any other event or condition specified as an Early Amortization Event in a Supplement for any Series.

If the Early Amortization Event described in either of clauses (4) or (5) has occurred, such condition shall be deemed cured if it does not exist on any subsequent Payment Date. Except as set forth in the immediately preceding sentence, if an Early Amortization Event exists on any Payment Date, then such Early Amortization Event shall, be deemed to continue until the Business Day on which the Requisite Global Majority waives, in writing, such Early Amortization Event. The Indenture Trustee shall promptly provide notice of any such waiver to the Rating Agencies.

Section 1202. Remedies. If an Early Amortization Event shall have occurred and then be continuing, the Indenture Trustee shall have in addition to the rights provided in the Transaction Documents, all rights and remedies provided under all applicable laws.

ARTICLE XIII

MISCELLANEOUS PROVISIONS

Section 1301. Compliance Certificates and Opinions. (a) Upon any application or request by the Issuer to the Indenture Trustee to take any action under any provision of this Indenture or any Supplement, the Issuer shall furnish to the Indenture Trustee a certificate stating that all conditions precedent, if any, provided for in this Indenture and any relevant Supplement relating to the proposed action have been complied with and, if required pursuant to the terms of this Indenture, an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished.

(b) Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include:

(i) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto;

(ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

(iii) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether such covenant or condition has been complied with; and

(iv) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with; provided that in the case of an opinion delivered by a law firm, such opinion may, but need not, make such statements with regard to the individual signing such opinion.

 

 

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Section 1302. Form of Documents Delivered to Indenture Trustee. (a) In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

(b) Any certificate or opinion may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, another Person, unless the Person providing such certificate or opinion knows that the certificate or opinion or representations with respect to the matters upon which such Person’s certificate or opinion is based are erroneous.

(c) Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.

Section 1303. Acts of Noteholders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture or any Supplement to be given or taken by Noteholders may be (i) embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Noteholders in person or by an agent duly appointed in writing, (ii) evidenced by the written consent or direction of Noteholders of the specified percentage of the principal amount of the Notes, or (iii) evidenced by a combination of such instrument or instruments; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments, or consent or direction, are delivered to the Indenture Trustee and, where it is hereby expressly required, to the Issuer. Proof of execution of any such instrument or of a writing appointing any such agent or of the execution of any written consent or direction shall be sufficient for any purpose of this Indenture and conclusive in favor of the Indenture Trustee and the Issuer, if made in the manner provided in this Section.

(b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Indenture Trustee deems sufficient.

(c) The ownership of Notes shall be proved by the Note Register.

(d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Noteholder shall bind every future Noteholder of the same Note and the Noteholder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Indenture Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Note.

Section 1304. Inspection. (a) Upon reasonable request, the Issuer agrees that it shall make available to any representative of the Indenture Trustee, the Administrative Agent, any Hedge Counterparty or any Series Enhancer and their duly authorized representatives, attorneys or accountants, for inspection and copying its books of account, records and reports relating to the Managed Containers and copies of all Leases or other documents relating thereto at the times and in accordance with the provisions of the Management Agreement. Each Noteholder, the Administrative Agent, each Series

 

 

61

 



Enhancer, each Hedge Counterparty and the Indenture Trustee agrees that it and its Affiliates and their respective shareholders, directors, agents, representatives, accountants and attorneys shall keep confidential any matter of which any of them becomes aware through such inspections or discussions (unless readily available from public sources that did not receive such information from such Person or otherwise in its possession from a source not having any confidentiality agreement with the Issuer or the Manager with respect thereto), except as may be otherwise required by regulation, law or court order or required by appropriate governmental authorities or as necessary to preserve or exercise its rights or security under or to enforce the Transaction Documents, provided that the foregoing shall not limit the right of any Noteholder, any Series Enhancer or any Hedge Counterparty, as the case may be, to make such information available to its regulators, securities rating agencies, and to reinsurers and credit and liquidity providers whom such party reasonably believes will respect the confidential nature of such information and from whom such party has requested confidential treatment of such information. Any expense incident to the reasonable exercise by the Indenture Trustee, the Administrative Agent, any Series Enhancer, any Hedge Counterparty or any Noteholder of any right under this Section (except for one annual inspection at the expense of the Issuer) shall be borne by the Person exercising such right unless an Early Amortization Event, Manager Default or Event of Default shall have occurred and then be continuing in which case such expenses shall be borne by the Issuer.

(b) The Issuer also agrees to make available on a reasonable basis to the Indenture Trustee, Administrative Agent, each Series Enhancer and each Hedge Counterparty a Managing Officer for the purpose of answering reasonable questions respecting recent developments affecting the Issuer.

Section 1305. Limitation of Right. Except as expressly set forth in this Indenture, this Indenture shall be binding upon the Issuer, the Noteholders and their respective successors and permitted assigns and shall not inure to the benefit of any Person other than the parties hereto, the Noteholders and the Manager as provided herein. Notwithstanding the previous sentence, the parties hereto, the Seller and the Manager acknowledge that each Hedge Counterparty and any Series Enhancer for a Series of Notes is an express third party beneficiary hereof entitled to enforce its rights hereunder as if actually a party hereto.

Section 1306. Severability. If any provision of this Indenture is held to be in conflict with any applicable statute or rule of law or is otherwise held to be unenforceable for any reason whatsoever, such circumstances shall not have the effect of rendering the provision in question inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions herein contained invalid, inoperative, or unenforceable to any extent whatsoever.

The invalidity of any one or more phrases, sentences, clauses or Sections of this Indenture shall not affect the remaining portions of this Indenture, or any part thereof.

Section 1307. Notices. (a) All demands, notices, instructions, directions and communications hereunder shall be in writing, personally delivered, or by facsimile (with subsequent telephone confirmation of receipt thereof), or sent by internationally recognized overnight courier service to:

 

Manager:

 

TAL International Container Corporation

100 Manhattanville Road

Purchase, New York 10577-2135

Attn: Jeffrey M. Casucci, Vice President, Treasury and Credit

Fax: 914-697-2526

 

 

 

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with a copy to:

 

 

 

 

 

TAL International Group, Inc.
100 Manhattanville Road
Purchase, New York 10577-2135
Attn: Marc A. Pearlin, General Counsel & Secretary
Fax: 914-697-2526

 

 

 

Issuer:

 

TAL ADVANTAGE II LLC
100 Manhattanville Road
Purchase, New York 10577-2135
Attn: Jeffrey M. Casucci

 

 

 

 

 

 

with a copy to:

 

 

 

 

 

TAL International Container Corporation
100 Manhattanville Road
Purchase, New York 10577-2135
Attn: Jeffrey M. Casucci, Vice President, Treasury and Credit
Fax: 914-697-2526

 

 

 

Indenture Trustee:

 

U.S. Bank National Association
60 Livingston Avenue
St. Paul, Minnesota 55107
Attention: TAL Advantage II, LLC, Variable Rate Secured Notes
Fax: 651-495-8090

 

 

 

Administrative Agent:

 

Fortis Capital Corp.
Loan Syndications/Agency
520 Madison Avenue
New York, NY 10022
Attn: Gloria Beloti-Fields, Assistant Vice President
Fax: 212-340-5450

 

 

 

 

 

With a copy to:

 

 

 

 

 

Fortis Capital Corp.
Two Embarcadero Center, Suite 1330
San Francisco, CA 94111
Attn: Menno van Lacum
Fax: (415) 283-3046

 

 

 

Series Enhancer:

 

at the address set forth in the related Enhancement Agreement

 

 

 

Hedge Counterparty:

 

To its address as set forth in the applicable Hedge Agreement

 

 

 

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or at such other address as shall be designated by such party in a written notice to the other parties. Any notice required or permitted to be given to a Noteholder shall be given by certified first class mail, postage prepaid (return receipt requested), or by courier, or by facsimile, with subsequent telephone confirmation of receipt thereof, in each case at the address of such Noteholder as shown in the Note Register or to the telephone and fax number furnished by such Noteholder. Notice shall be effective and deemed received (a) two (2) days after being delivered to the courier service, if sent by courier, (b) upon receipt of confirmation of transmission, if sent by fax, or (c) when delivered, if delivered by hand. Any rights to notices conveyed to a Rating Agency pursuant to the terms of this Indenture with respect to any Series or Class shall terminate immediately if such Rating Agency no longer has a rating outstanding with respect to such Series or Class.

Section 1308. Consent to Jurisdiction. ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, OR ANY TRANSACTION CONTEMPLATED HEREBY, MAY BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE COUNTY OF NEW YORK, STATE OF NEW YORK AND EACH PARTY HERETO HEREBY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND, SOLELY FOR THE PURPOSES OF THIS INDENTURE, EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING.

Section 1309. Captions. The captions or headings in this Indenture are for convenience only and in no way define, limit or describe the scope or intent of any provisions or sections of this Indenture.

Section 1310. Governing Law. THE INDENTURE SHALL BE CONSTRUED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING SECTION 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW BUT OTHERWISE WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW, AND THE RIGHTS, OBLIGATIONS AND REMEDIES OF THE PARTIES HERETO SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

Section 1311. No Petition. The Indenture Trustee, on its own behalf, hereby covenants and agrees, and each Noteholder by its acquisition of a Note shall be deemed to covenant and agree, that it will not institute (or cause or direct or solicit any Person to institute) against the Issuer any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any federal or state bankruptcy or similar law, at any time other than on a date which is at least one (1) year and one (1) day after the later of (a) the last date on which any Note of any Series was Outstanding and (b) the date on which all amounts owing to the Series Enhancers pursuant to the terms of the Indenture and the Enhancement Agreements have been paid in full.

Section 1312. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, AS AGAINST THE OTHER PARTY HERETO, ANY RIGHTS IT MAY HAVE TO A JURY TRIAL IN RESPECT OF ANY CIVIL ACTION OR PROCEEDING (WHETHER ARISING IN CONTRACT OR TORT OR OTHERWISE), INCLUDING ANY

 

 

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COUNTERCLAIM, ARISING UNDER OR RELATING TO THIS INDENTURE OR ANY OTHER TRANSACTION DOCUMENT, INCLUDING IN RESPECT OF THE NEGOTIATION, ADMINISTRATION OR ENFORCEMENT HEREOF OR THEREOF.

Section 1313. Waiver of Immunity. To the extent that any party hereto or any of its property is or becomes entitled at any time to any immunity on the grounds of sovereignty or otherwise from any legal actions, suits or proceedings, from set-off or counterclaim, from the jurisdiction or judgment of any competent court, from service of process, from execution of a judgment, from attachment prior to judgment, from attachment in aid of execution, or from execution prior to judgment, or other legal process in any jurisdiction, such party, for itself and its successors and assigns and its property, does hereby irrevocably and unconditionally waive, and agrees not to plead or claim, any such immunity with respect to its obligations, liabilities or any other matter under or arising out of or in connection with this Indenture, the other Transaction Documents or the subject matter hereof or thereof, subject, in each case, to the provisions of the Transaction Documents and mandatory requirements of Applicable Law.

Section 1314. Judgment Currency. The parties hereto (A) acknowledge that the matters contemplated by this Indenture are part of an international financing transaction and (B) hereby agree that (i) specification and payment of Dollars is of the essence, (ii) Dollars shall be the currency of account in the case of all obligations under the Transaction Documents unless otherwise expressly provided herein or therein, (iii) the payment obligations of the parties under the Transaction Documents shall not be discharged by an amount paid in a currency or in a place other than that specified with respect to such obligations, whether pursuant to a judgment or otherwise, except to the extent actually received by the Person entitled thereto and converted into Dollars by such Person (it being understood and agreed that, if any party hereto shall so receive an amount in a currency other than Dollars, it shall (A) if it is not the Person entitled to receive payment, promptly return the same (in the currency in which received) to the Person from whom it was received or (B) if it is the Person entitled to receive payment, either, in its sole discretion, (x) promptly return the same (in the currency in which received) to the Person from whom it was received or (y) subject to reasonable commercial practices, promptly cause the conversion of the same into Dollars), (iv) to the extent that the amount so paid on prompt conversion to Dollars under normal commercial practices does not yield the requisite amount of Dollars, the obligee of such payment shall have a separate cause of action against the party obligated to make the relevant payment for the additional amount necessary to yield the amount due and owing under the Transaction Documents, (v) if, for the purpose of obtaining a judgment in any court with respect to any obligation under any of the Transaction Documents, it shall be necessary to convert to any other currency any amount in Dollars due thereunder and a change shall occur between the rate of exchange applied in making such conversion and the rate of exchange prevailing on the date of payment of such judgment, the obligor in respect of such obligation will pay such additional amounts (if any) as may be necessary to insure that the amount paid on the date of payment is the amount in such other currency which, when converted into Dollars and transferred to New York City, New York, in accordance with normal banking procedures, will result in realization of the amount then due in Dollars and (vi) any amount due under this paragraph shall be due as a separate debt and shall not be affected by or merged into any judgment being obtained for any other sum due under or in respect of the Transaction Documents.

Section 1315. Hedge Counterparty. Notwithstanding any term or provision of this Indenture, if an Hedge Counterparty is in default under the related Hedge Agreement, then such Hedge Counterparty shall not have any right to give or withhold any consent, direction, notice, request, permission or approval under this Indenture or to receive any notice, report or other document under this Indenture or to exercise any other right, power or remedy under this Indenture; provided, however, that, notwithstanding this Section 1315, no amendment of this Indenture shall change the rights of the Hedge Counterparty pursuant to Section 1001, 1002 or Section 1006 hereof without the prior written consent of such Hedge Counterparty .

 

 

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Section 1316. Consents and Approvals. If a consent or approval from any Person (other than the Issuer and other than any Noteholder) is required under this Indenture or any Supplement, such consent or approval shall be deemed to have been given if the Issuer does not receive a written objection from such Person with ten (10) Business Days after a written request for such consent or approval shall have been given.

Section 1317. Counterparts. This Indenture may be executed in two or more counterparts, and by different parties on separate counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument. Delivery of an executed counterpart of this Indenture by facsimile or by electronic means shall be equally effective as of the delivery of an originally executed counterpart.

 

 

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IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused this Indenture to be duly executed and delivered, all as of the day and year first above written.

 

 

 

TAL ADVANTAGE II LLC,

 

 

 

By:

TAL International Container Corporation,
its manager

 

 


By: 

 

 

 

Name: 

 

 

 

 

Title: 

 

 

 

App-I

 



 

 

 

U.S. BANK NATIONAL ASSOCIATION,
not individually but solely as Indenture Trustee

 

 


By: 

 

 

 

Name: 

 

 

 

 

Title: 

 

 

 

II

 


EX-10.53 3 file3.htm SERIES 2008-1 SUPPLEMENT, DATED AS OF 3-27-08

 

 

 

TAL ADVANTAGE II LLC

Issuer

and

U.S. BANK NATIONAL ASSOCIATION

Indenture Trustee

 

SERIES 2008-1 SUPPLEMENT

Dated as of March 27, 2008

to

INDENTURE

Dated as of March 27, 2008

 

SERIES 2008-1 FLOATING RATE SECURED NOTES

 

 

 



TABLE OF CONTENTS

 

ARTICLE I

 

 

 

 

 

DEFINITIONS

 

 

 

 

 

Section 101.

 

Definitions

 

1

 

 

 

 

 

ARTICLE II

 

 

 

 

 

CREATION OF THE SERIES 2008-1 NOTES; MODIFICATION OF INDENTURE

 

 

 

 

 

Section 201.

 

Designation and Principal Terms

 

7

Section 202.

 

Authentication and Delivery

 

8

Section 203.

 

Interest and Other Payments on the Series 2008-1 Notes

 

9

Section 204.

 

Principal Payments on the Series 2008-1 Notes; Scheduled Amortization of Series 2008-1 Notes

 

9

Section 205.

 

Amounts and Terms of Series 2008-1 Noteholder Commitments

 

10

Section 206.

 

Taxes

 

12

Section 207.

 

Increased Costs

 

15

Section 208.

 

Capital Requirements

 

16

Section 209.

 

Replacement of Series 2008-1 Noteholder

 

17

 

 

 

 

 

ARTICLE III

 

 

 

 

 

SERIES 2008-1 SERIES ACCOUNT AND ALLOCATION AND APPLICATION OF
AMOUNTS THEREIN

 

 

 

 

 

Section 301.

 

Series 2008-1 Series Account

 

18

Section 302.

 

Distributions from Series 2008-1 Series Account

 

18

 

 

 

 

 

ARTICLE IV

 

 

 

 

 

ADDITIONAL COVENANTS; ADDITIONAL EVENTS OF DEFAULT

 

 

 

 

 

Section 401.

 

Increase in the Aggregate Series 2008-1 Note Existing Commitment

 

21

Section 402.

 

Issuance of Additional Series of Notes

 

21

Section 403.

 

Use of Proceeds

 

21

Section 404.

 

Additional Event of Default

 

21

 

 

 

 

 

ARTICLE V

 

 

 

 

 

CONDITIONS OF CLOSING AND FUTURE LENDING

 

 

 

 

 

Section 501.

 

Conditions to Closing

 

22

Section 502.

 

Advances on Series 2008-1 Notes

 

24

 

 

-i-

 



TABLE OF CONTENTS

(continued)

 

ARTICLE VI

 

 

 

 

 

REPRESENTATIONS AND WARRANTIES

 

 

 

 

 

Section 601.

 

Existence

 

24

Section 602.

 

Authorization

 

25

Section 603.

 

No Conflict; Legal Compliance

 

25

Section 604.

 

Validity and Binding Effect

 

25

Section 605.

 

Material Adverse Change

 

25

Section 606.

 

Place of Business

 

25

Section 607.

 

No Agreement or Contracts

 

25

Section 608.

 

Consents and Approvals

 

26

Section 609.

 

Margin Regulations

 

26

Section 610.

 

Taxes

 

26

Section 611.

 

Other Regulations

 

26

Section 612.

 

Solvency and Separateness

 

27

Section 613.

 

Survival of Representations and Warranties

 

27

Section 614.

 

No Default

 

27

Section 615.

 

Litigation and Contingent Liabilities

 

28

Section 616.

 

Title; Liens

 

28

Section 617.

 

Subsidiaries

 

28

Section 618.

 

No Partnership

 

28

Section 619.

 

Pension and Welfare Plans

 

28

Section 620.

 

Ownership of the Issuer

 

28

Section 621.

 

Security Interest Representations

 

28

Section 622.

 

Tax Election of the Issuer

 

30

 

 

 

 

 

ARTICLE VII

 

 

 

 

 

THE GUARANTY

 

 

 

 

 

Section 701.

 

The Guaranty

 

30

 

 

 

 

 

ARTICLE VIII

 

 

 

 

 

MISCELLANEOUS PROVISIONS

 

 

 

 

 

Section 801.

 

Ratification of Indenture

 

30

Section 802.

 

Counterparts

 

31

Section 803.

 

Governing Law

 

31

Section 804.

 

Amendments and Modifications

 

31

Section 805.

 

Consent to Jurisdiction

 

31

Section 806.

 

Waiver of Jury Trial

 

32

 

 

 

 

 

EXHIBITS

 

 

 

 

 

 

 

 

 

EXHIBIT A

 

Form of Series 2008-1 Note

 

 

 

 

 

 

 

 

 

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TABLE OF CONTENTS

(continued)

 

SCHEDULES

 

 

 

 

 

 

 

 

 

SCHEDULE 1

 

Percentage of Minimum Targeted Principal Balance and Percentage of Scheduled Targeted Principal Balance Series 2008-1 Notes

 

 

SCHEDULE 2

 

Commitments

 

 

 

 

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This SERIES 2008-1 SUPPLEMENT, dated as of March 27, 2008 (as amended, modified or supplemented from time to time in accordance with the terms hereof, this “Supplement”), is between TAL ADVANTAGE II LLC, a limited liability company organized under the laws of Delaware (the “Issuer”), and U.S. BANK NATIONAL ASSOCIATION, a national banking association, as indenture trustee (the “Indenture Trustee”).

Each party agrees as follows for the benefit of the other party and the Series 2008-1 Noteholders:

ARTICLE I

Definitions

Section 101. Definitions. (a) Whenever used in this Supplement, the following words and phrases shall have the following meanings, and the definitions of such terms are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms.

“Additional Series 2008-1 Noteholder” shall have the meaning set forth in Section 205(d).

“Adjusted Eurodollar Rate” means, for any Interest Accrual Period, an interest rate per annum equal to the quotient, expressed as a percentage and rounded upwards (if necessary) to the nearest 1/1000 of 1%, obtained by dividing (i) LIBOR on the second Business Day immediately preceding the first day of such Interest Accrual Period by (ii) the decimal equivalent of 100% minus the Eurodollar Reserve Percentage on the second Business Day immediately preceding the first day of such Interest Accrual Period.

“Aggregate Series 2008-1 Principal Balance” means, as of any date of determination, an amount equal to the sum of the Series 2008-1 Principal Balances of all Series 2008-1 Notes then Outstanding.

“Applicable Funding Basis” means, for any day during any Interest Accrual Period, one of the following:

(i) if no Eurodollar Disruption Event is then continuing, the Adjusted Eurodollar Rate; or

(ii) if a Eurodollar Disruption Event is then continuing, the Base Rate.

“Applicable Margin” means, for any Interest Accrual Period, one of the following amounts:

(i) prior to the Conversion Date, one and one quarter of one percent (1.25%); or

 

 

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(ii) on or after the Conversion Date, one and one half of one percent (1.50%).

The amount of the Applicable Margin shall be increased from time to time in accordance with the provisions of Section 205(d).

“Availability” means, as of any date of determination for any Series 2008-1 Noteholder, the lesser of:

(A) the excess, if any, of (x) the Series 2008-1 Note Existing Commitment of such Series 2008-1 Noteholder on such date of determination over (y) the then Series 2008-1 Principal Balance of the Series 2008-1 Note owned by such Series 2008-1 Noteholder on such date of determination; and

(B) such Series 2008-1 Noteholder’s Percentage of an amount equal to the excess of (x) the Asset Base, over (y) the then Aggregate Note Principal Balance (calculated without giving effect to the requested Series 2008-1 Advance).

“Base Rate” means on any date, a fluctuating rate of interest per annum equal to the higher of (a) the Prime Rate and (b) the Federal Funds Rate plus 0.50% per annum.

Benefit Plan Investor means an “employee benefit plan” as defined in Section 3(3) of ERISA whether or not it is subject to Title I of ERISA, a “plan” within the meaning of Section 4975(e)(1) of the Code or an entity whose underlying assets include “plan assets” of any of the foregoing by reason of an employee benefit plan’s or plan’s investment in such entity.

“Breakage Costs” means, with respect to an Interest Accrual Period, any reasonable loss, cost or expense incurred by a Series 2008-1 Noteholder, including, without limitation, any loss (including loss of anticipated profits, net of anticipated profits in the reemployment of such funds), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Series 2008-1 Noteholder to fund or maintain a Series 2008-1 Advance, as the case may be, during such Interest Accrual Period.

“Closing Datemeans March 27, 2008.

“Commitment Fee” shall have the meaning set forth in Section 205(c) hereof.

“Commitment Fee Percentage” means three eighths of one percent (0.375%) per annum. The amount of the Commitment Fee Percentage shall be increased from time to time in accordance with the provisions of Section 205(d).

“Control Party” means, with respect to the Series 2008-1 Notes, the Majority of Holders of the Series 2008-1 Notes.

“Conversion Date” means, with respect to the Series 2008-1 Notes, the earlier to occur of (i) the date on which an Early Amortization Event occurs under any Series of Notes issued pursuant to the Indenture, and (ii) June 30, 2009 (as such date may be extended in accordance with Section 2.1(c) of the Note Purchase Agreement).

 

 

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“Default Fee” means, for any Payment Date on which interest on overdue amounts is payable in accordance with the provisions of Section 203(b) hereof, the amount of interest payable on such Payment Date pursuant to the provisions of Section 203(b).

“Default Rate” means, for any date of determination, an interest rate per annum equal to the sum of (i) the interest rate then otherwise in effect plus (ii) two percent (2%).

“Deficiency Amount” means (a) for each Payment Date other than the Series 2008-1 Legal Final Maturity Date, any shortfall in the aggregate amount available in the Series 2008-1 Series Account for the Series 2008-1 Notes or any other amounts available under the Indenture or this Supplement to pay both (i) the Series 2008-1 Interest Payment for such Payment Date and (ii) the Scheduled Principal Payment Amount for such Payment Date, and (b) on the Series 2008-1 Legal Final Maturity Date, any shortfall in the aggregate amount available in the Series 2008-1 Series Account or any other amounts available under the Indenture or this Supplement to pay the then Aggregate Series 2008-1 Principal Balance, accrued but unpaid interest thereon and all other amounts owing to the Series 2008-1 Noteholders pursuant to the terms of the Series 2008-1 Transaction Documents.

“Dollars” and the sign “$” means lawful money of the United States of America.

“Early Amortization Event” shall have the meaning set forth in Appendix A to the Indenture.

“Eurodollar Disruption Event” means as of any date of determination, the existence of any of the following events or conditions: (a) a reasonable determination by a Series 2008-1 Noteholder that it would be contrary to law, or to the directive of any central bank or other governmental authority (whether or not having the force of law), to obtain Dollars in the London interbank market to make, fund or maintain its investment in any Series 2008-1 Note, or (b) the inability of a Series 2008-1 Noteholder (due to no fault of its own) to obtain Dollars in the London interbank market to make, fund or maintain its investment in any Series 2008-1 Note.

“Federal Funds Rate” means as of any date of determination, a fluctuating interest rate per annum equal to the weighted average of the federal funds rates and confirmed in Federal Reserve Board Statistical Release H.15 (519) or any successor or substitute publication selected by the Indenture Trustee (or, if such day is not a Business Day, for the next preceding Business Day), or, if, for any reason, such rate is not available on any day, the rate determined, in the sole opinion of the Indenture Trustee, to be the rate at which federal funds are being offered for sale in the national federal funds market at 9:00 a.m. (New York City time on such day).

“Fortis” means Fortis Capital Corp.

“Guaranty” means the guaranty, dated as of March 27, 2008, issued by the Guarantor in favor of the Indenture Trustee with respect to the Series 2008-1 Notes.

“Guarantor” means TAL International Group, Inc., a corporation organized under the laws of the State of Delaware.

“Indemnified Party” has the meaning given thereto in Section 206.

 

 

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Indenture means the Indenture, dated as of March 27, 2008 between the Issuer and the Indenture Trustee, as the same may be amended, amended and restated or otherwise modified from time to time.

“Interest Accrual Period” means with respect to each Series 2008-1 Advance, the period commencing on and including the immediately preceding Payment Date and ending on the last day immediately preceding the next Payment Date. In the case of a Series 2008-1 Advance made on a date other than the first day of an Interest Accrual Period, the initial Interest Accrual Period for such Series 2008-1 Advance shall begin on the day of such Series 2008-1 Advance and shall end on the Payment Date in the following month. When switching from Adjusted Eurodollar Rate to Base Rate funding, the first Interest Accrual Period with respect to such Base Rate funding shall begin on the date of such switch and shall end on a date selected by the Issuer in its discretion.

“Liquidity Provider” shall have the meaning set forth in the Series 2008-1 Note Purchase Agreement.

“Majority of Holders” means, with respect to the Series 2008-1 Notes, one or more Series 2008-1 Noteholders holding Notes constituting more than fifty percent (50%) of the then Aggregate Series 2008-1 Principal Balance.

“Minimum Principal Payment Amount means, for the Series 2008-1 Notes on any Payment Date, one of the following:

(1) for any Payment Date prior to the Conversion Date, zero; or

(2) for any Payment Date following the Conversion Date, the excess, if any, of (x) the Aggregate Series 2008-1 Principal Balance, over (y) the Minimum Targeted Principal Balance for the Series 2008-1 Notes for such Payment Date.

Minimum Targeted Principal Balance means for the Series 2008-1 Notes for each Payment Date, an amount equal to the product of (x) the Aggregate Series 2008-1 Principal Balance on the Conversion Date and (y) the percentage set forth opposite such Payment Date (based on the number of Payment Dates elapsed from the Closing Date) on Schedule 1 hereto under the column titled “Percentage (Minimum Targeted Principal Balance)”.

“Notice” means the telephonic or telegraphic notice, promptly confirmed in writing by telecopy in the form required by the Guaranty, the original of which is subsequently delivered by registered or certified mail, from the Indenture Trustee specifying the Deficiency Amount which shall be due and owing on the applicable Payment Date.

“Other Taxes” shall have the meaning set forth in Section 206(b).

“Payment Date” shall have the meaning set forth in Section 201.

“Percentage” means, with respect to any Series 2008-1 Noteholder as of any date of determination, a fraction (expressed as a percentage), the numerator of which is such Series 2008-1 Noteholder’s Series 2008-1 Note Existing Commitment and the denominator of which is equal to the sum of the Series 2008-1 Note Existing Commitments of all Series 2008-1 Noteholders.

 

 

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“Plan” means any employee pension benefit plan, as defined in Section 3(2) of ERISA, that is subject to Title IV of ERISA and that is established or maintained by the Issuer.

“Prime Rate means the rate announced by Citibank, N.A., from time to time as its “prime rate” or “base rate” in the United States, such rate to change as and when such designated rate changes. The Prime Rate is not necessarily the lowest rate of interest charged by Citibank, N.A. in connection with extensions of credit to debtors.

“Scheduled Principal Payment Amount” means, for the Series 2008-1 Notes for any Payment Date, one of the following:

(1) for any Payment Date prior to the Conversion Date, zero; or

(2) for any Payment Date following the Conversion Date, the excess, if any, of (x) the then Aggregate Series 2008-1 Principal Balance (determined after giving effect to the Minimum Principal Payment Amount for the Series 2008-1 Notes actually paid on such Payment Date), over (y) the Scheduled Targeted Principal Balance for the Series 2008-1 Notes for such Payment Date.

“Scheduled Targeted Principal Balance” means, for the Series 2008-1 Notes for each Payment Date, an amount equal to the product of (x) the Aggregate Series 2008-1 Principal Balance on the Conversion Date and (y) the percentage set forth opposite such Payment Date (based on the number of Payment Dates elapsed from the Conversion Date) on Schedule 1 hereto under the column titled “Percentage (Scheduled Targeted Principal Balance)”.

“Series 2008-1” means the Series of Notes the terms of which are specified in this Supplement.

“Series 2008-1 Advance” means an advance of funds made by one or more of the Series 2008-1 Noteholders pursuant to the provisions of Section 205(b) of this Supplement.

“Series 2008-1 Expected Final Maturity Date” means the Payment Date occurring on the ninth (9th) annual anniversary of the Conversion Date.

“Series 2008-1 Interest Payment” means for each Payment Date, an amount equal to the sum for each Series 2008-1 Advance outstanding for each day during the Interest Accrual Period ending on the preceding day of the product of (i) the principal amount of such Series 2008-1 Advance, (ii) an amount equal to the sum of (x) the Applicable Funding Basis for such Series 2008-1 Advance and (y) the Applicable Margin, and (iii) 1/360, in the case of the Adjusted Eurodollar Rate, or 1/365 or 1/366, as applicable, in the case of the Base Rate.

“Series 2008-1 Legal Final Maturity Date” means the Payment Date occurring on the fifteenth (15th) annual anniversary of the Closing Date.

 

 

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“Series 2008-1 Note Existing Commitment” means, with respect to any Series 2008-1 Noteholder, the purchase limit or commitment set forth in the Series 2008-1 Note Purchase Agreement, as such commitment may be (i) increased upon the written consent of such Series 2008-1 Noteholder and the Requisite Global Majority in connection with each such increase or (ii) reduced from time to time at the request of the Issuer, in each case in accordance with the terms of the Series 2008-1 Note Purchase Agreement.

“Series 2008-1 Note Initial Commitment” means, with respect to any Series 2008-1 Noteholder, the amount set forth opposite the name of such Series 2008-1 Noteholder on Schedule 2 hereto (as such Schedule 2 shall be deemed to be amended by a properly executed Related Group Addition Notice (as such term is defined in the Series 2008-1 Note Purchase Agreement), Assignment and Acceptance (as such term is defined in the Series 2008-1 Note Purchase Agreement)) or Increase Letter (as such term is defined in the Series 2008-1 Note Purchase Agreement).

“Series 2008-1 Note Purchase Agreement” means the Note Purchase Agreement, dated as of March 27, 2008, among the Issuer, the initial Series 2008-1 Noteholder and various financial institutions from time to time, as such agreement may be amended or restated from time to time.

“Series 2008-1 Noteholder” shall mean the Person in whose name a Series 2008-1 Note is registered in the Note Register.

“Series 2008-1 Notes” shall mean any one of the notes, substantially in the form of Exhibit A to this Supplement, issued pursuant to the terms of this Supplement, and replacements therefor issued pursuant to the terms of the Indenture.

“Series 2008-1 Principal Balance” means, with respect to any Series 2008-1 Note as of any date of determination, an amount equal to the excess, if any, of (x) the sum of all Series 2008-1 Advances made by such Series 2008-1 Noteholder on or subsequent to the Closing Date, over (y) the cumulative amount of all principal payments (including Prepayments) actually paid to such Series 2008-1 Noteholder subsequent to the Closing Date.

“Series 2008-1 Series Account” means a Series Account for Series 2008-1 established by the Issuer in the name of the Issuer with the Indenture Trustee into which funds are deposited from the Trust Account pursuant to Section 302 of the Indenture.

“Series 2008-1 Transaction Documents” means this Supplement, the Series 2008-1 Notes, the Series 2008-1 Note Purchase Agreement, all other Transaction Documents, any Hedge Agreements, and any and all other agreements, documents and instruments executed and delivered by or on behalf or in support of the Issuer with respect to the issuance and sale of the Series 2008-1 Notes, as any of the foregoing may from time to time be amended, modified, supplemented or renewed.

“Series 2008-1 Unused Commitment” means, with respect to any Series 2008-1 Noteholder as of any date of determination, the excess, if any, of (i) the Series 2008-1 Note Existing Commitment then in effect for such Series 2008-1 Noteholder over (ii) the Series 2008-1 Principal Balance of the Series 2008-1 Note owned by such Series 2008-1 Noteholder as of

 

 

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such date of determination, such principal balance to be measured after giving effect to all Series 2008-1 Advances made and all principal payments to be received by such Series 2008-1 Noteholder on such date of determination.

(b) All other capitalized terms used herein and not otherwise defined shall have the meaning set forth in Appendix A to the Indenture, as such Appendix A may be amended, supplemented or otherwise modified from time to time in accordance with the provisions of the Indenture. The rules of usage set forth in such Appendix A shall apply to this supplement.

ARTICLE II

Creation of the Series 2008-1 Notes; Modification of Indenture

Section 201. Designation and Principal Terms. (a) There is hereby created a Series of Notes to be issued in one Class pursuant to the Indenture and this Supplement to be known respectively as “TAL Advantage II LLC Series 2008-1 Floating Rate Secured Notes”. The Series 2008-1 Notes will be issued in the initial aggregate maximum principal balance of up to Two Hundred Fifty Million Dollars ($250,000,000). The Series 2008-1 Notes will not have priority over any Series, except to the extent set forth in the Indenture or in the Supplement for such other Series. The Series 2008-1 Notes are designated as a Series of Warehouse Notes.

(b) The Payment Date with respect to the Series 2008-1 Notes shall be the twentieth (20th) day of each month, commencing April 20, 2008 or, if such day is not a Business Day, the immediately following Business Day (each a “Payment Date”).

(c) Payments of principal and interest on the Series 2008-1 Notes shall be payable from funds on deposit in the Series 2008-1 Series Account or otherwise at the times and in the amounts set forth in Article III of the Indenture and Article III hereof.

(d) The Series 2008-1 Interest Payment and the Commitment Fee shall constitute “Priority Payments” for Series 2008-1 as such term is defined in the Indenture.

(e) All of the Early Amortization Events set forth in Article XII of the Indenture are applicable to Series 2008-1. All of the Events of Default set forth in Section 801 of the Indenture are applicable to Series 2008-1 and each of the events and conditions set forth in Section 406 of this Supplement shall also constitute additional Events of Default applicable to Series 2008-1.

(f) The Series 2008-1 Notes shall have the benefit of the Guaranty. However such Guaranty shall not be considered to be an Enhancement Agreement and the Guarantor shall not have the benefits afforded to a Series Enhancer.

(g) The “Initial Commitment” for Series 2008-1, as such term is referred to in the Indenture, shall mean the Series 2008-1 Note Initial Commitment.

(h) The “Commitment” for Series 2008-1, as such term is referred to in the Indenture, shall mean the Series 2008-1 Note Existing Commitment.

 

 

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(i) In the event that any term or provision contained herein shall conflict with or be inconsistent with any term or provision contained in the Indenture, the terms and provisions of this Supplement shall govern.

(j) The “Expected Final Maturity Date” for Series 2008-1, as such term is referred to in the Indenture, shall mean the Series 2008-1 Expected Final Maturity Date.

(k) The “Legal Final Maturity Date” for Series 2008-1, as such term is referred to in the Indenture, shall mean the Series 2008-1 Legal Final Maturity Date.

(l) For purposes of the Indenture, only the Series 2008-1 Interest Payment and the Commitment Fee shall be a Priority Payment. For purposes of Section 801(1)(A) of the Indenture, the Series 2008-1 Interest Payment will be due and payable on each Payment Date.

(m) The Series 2008-1 Notes have not been rated by a Rating Agency as of the Closing Date. Accordingly, any provision of the Series 2008-1 Transaction Documents requiring notification of or providing notices to the Rating Agencies or required for satisfaction of the Rating Agency Condition shall not be applicable to Series 2008-1 Notes until such time (if any) a Rating Agency has assigned a rating to the Series 2008-1 Notes.

Section 202. Authentication and Delivery.

(a) Execution and Delivery. On the Closing Date, the Issuer shall sign, and shall direct the Indenture Trustee in writing pursuant to Section 201 of the Indenture to duly authenticate, and the Indenture Trustee, upon receiving such direction, (i) shall authenticate (by manual or facsimile signature), subject to compliance with the conditions precedent set forth in Section 501 hereof and the Series 2008-1 Note Purchase Agreement, the Series 2008-1 Notes in accordance with such written directions, and (ii) subject to compliance with the conditions precedent set forth in Section 501 hereof and the Series 2008-1 Note Purchase Agreement, shall deliver such Series 2008-1 Notes to the Noteholders in accordance with such written directions.

(b) Definitive Notes. In accordance with Section 202 of the Indenture, the Series 2008-1 Notes shall be represented by one or more Definitive Notes.

(c) Original or Facsimile Signatures. The Series 2008-1 Notes shall be executed by manual or facsimile signature on behalf of the Issuer by any authorized officer or manager of the Issuer and shall be substantially in the form of Exhibit A hereto.

(d) Minimum Denominations. The Series 2008-1 Notes shall be issued in minimum denominations of $100,000 and in integral multiples of $100,000 in excess thereof.

(e) Restrictions on Transfer of Series 2008-1 Notes. Notwithstanding the provisions of Section 205 of the Indenture (except for Section 205(l) thereof), each Series 2008-1 Noteholder may sell, transfer or assign its Series 2008-1 Note(s) provided that (i) such Series 2008-1 Noteholder must obtain the Issuer’s prior written consent authorizing such Series 2008-1 Noteholder to contact a proposed purchaser, transferee or assignee (unless such proposed purchaser, transferee or assignee is an Eligible Assignee), which consent shall not be unreasonably withheld or delayed; (ii) unless such proposed purchaser, transferee or assignee is

 

 

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an Eligible Assignee, such Series 2008-1 Noteholder must obtain the Issuer’s prior written consent to consummate such sale, transfer or assignment; (iii) the Issuer receives a fully executed Investment Letter from such Series 2008-1 Noteholder and the applicable purchaser, transferee or assignee; (iv) such sale, transfer or assignment will not result in any increased costs to the Issuer without its written consent; and (v) such sale, transfer or assignment is not to a Competitor. The provisions of this Section 205(e) may be modified in a written agreement between the Issuer and the Indenture Trustee.

Section 203. Interest and Other Payments on the Series 2008-1 Notes.

(a) Interest on Series 2008-1 Notes. Interest will be owing on the Series 2008-1 Notes in an amount equal to the Series 2008-1 Interest Payment, which shall be payable on each Payment Date from amounts on deposit in the Series 2008-1 Series Account in accordance with Section 302 hereof including the priority of payments set forth therein.

(b) Interest on Overdue Amounts. If the Issuer shall default in the payment of (i) the unpaid principal balance of any Series 2008-1 Notes on the Series 2008-1 Legal Final Maturity Date, (ii) the Series 2008-1 Payment on any Series 2008-1 Note when due, or (iii) following the acceleration of the Series 2008-1 Notes in accordance with the terms of the Indenture, any other amount owing under the Indenture not covered in clauses (i) and (ii) which is not paid when due, the Issuer shall, from time to time, pay interest on such unpaid amounts, to the extent permitted by Applicable Law, to, but not including, the date of actual payment (after as well as before judgment), at a rate per annum equal to the Default Rate, for the period during which such principal, interest or other amount shall be unpaid from the due date of such payment to but not including the date of actual payment thereof. All Default Fees shall be payable at the times and subject to the priorities set forth in Section 302 hereof.

(c) Maximum Interest Rate. In no event shall the interest charged with respect to a Series 2008-1 Note exceed the maximum amount permitted by Applicable Law. If at any time the interest rate charged with respect to the Series 2008-1 Notes exceeds the maximum rate permitted by Applicable Law, the rate of interest to accrue pursuant to this Supplement and such Series 2008-1 Note shall be limited to the maximum rate permitted by Applicable Law.

Section 204. Principal Payments on the Series 2008-1 Notes; Scheduled Amortization of Series 2008-1 Notes.

(a) The principal balance of the Series 2008-1 Notes shall be payable on each Payment Date from amounts on deposit in the Series 2008-1 Series Account in an amount equal to (i) so long as no Early Amortization Event is continuing, the Minimum Principal Payment Amount, the Scheduled Principal Payment Amount and the allocable portion of the Supplemental Principal Payment Amount (if any) for such Series 2008-1 Note for such Payment Date, to the extent that funds are available for such purpose in accordance with the provisions of part I of Section 302 hereof, or (ii) if an Early Amortization Event is then continuing, the Minimum Principal Payment Amount, the Scheduled Principal Payment Amounts and then unpaid Series 2008-1 Principal Balance of such Series 2008-1 Note shall be payable in full to the extent that funds are available for such purposes in accordance with the provisions of part (II) of Section 302 hereof. Payment of the Supplemental Principal Payment Amount on each Payment

 

 

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Date is subordinated to payment in full on such Payment Date of the Minimum Principal Payment Amount and the Scheduled Principal Payment Amount for the Series 2008-1 Notes and any other Notes then Outstanding. The unpaid principal amount of each Series 2008-1 Note, together with all unpaid interest (including all Default Fees), fees (including all Commitment Fees), expenses, costs and other amounts payable by the Issuer to the Series 2008-1 Noteholders and the Indenture Trustee pursuant to the terms of the Indenture and this Supplement, shall be due and payable in full on the earlier to occur of (x) the date on which an Event of Default shall occur and the Series 2008-1 Notes have been accelerated in accordance with Section 802 of the Indenture and (y) the Series 2008-1 Legal Final Maturity Date.

(b) The Issuer may, on any Payment Date and upon four (4) Business Days’ prior notice to the Series 2008-1 Noteholders in accordance with the terms of Section 8.2 of the Series 2008-1 Note Purchase Agreement, voluntarily prepay all, or any part, of the Series 2008-1 Principal Balance by making a wire transfer to the Series 2008-1 Noteholders; provided, however, that the Issuer may not make such repayment from funds in the Trust Account, the Series 2008-1 Series Account or the Restricted Cash Account (if such account has been opened) except to the extent that funds in any such account would otherwise be payable to the Issuer or available to prepay the Aggregate Series 2008-1 Principal Balance in accordance with the terms of this Supplement or the Indenture. In the event of any Prepayment of the Notes in accordance with this Section 204(b) or any other provision of the Indenture, the Issuer shall pay, if such Prepayment is made on a date other than a Payment Date, any Breakage Costs incurred by the Series 2008-1 Noteholders in connection with such prepayment.

(c) Any Prepayment of less than the entire Aggregate Series 2008-1 Principal Balance made in accordance with the provisions of Section 204(a) or 204(b) hereof on or after the Conversion Date shall be applied as set forth in Section 702(c) of the Indenture to the same extent as if the Series 2008-1 Notes were a Series of Term Notes.

Section 205. Amounts and Terms of Series 2008-1 Noteholder Commitments.

(a) Commitments. Subject to the terms and conditions of this Supplement and the Series 2008-1 Note Purchase Agreement, each Series 2008-1 Noteholder shall make its Percentage of the Series 2008-1 Note Initial Commitment available to the Issuer on the Closing Date.

(b) Advances. Prior to the Conversion Date, each Series 2008-1 Note shall be a revolving note with a maximum principal amount equal to the Series 2008-1 Note Existing Commitment then in effect for the related Series 2008-1 Noteholder. The Administrative Agent and each Series 2008-1 Noteholder shall maintain a record of all Series 2008-1 Advances and repayments made on the Series 2008-1 Notes and absent manifest error such records shall be conclusive. Each request for a Series 2008-1 Advance shall be submitted in writing to the Administrative Agent by not later than 1:00 p.m. (New York City time) on the third (3rd) Business Day prior to the date of the requested advance and shall be irrevocable when given. Such notice shall include a calculation of the aggregate Series 2008-1 Advance to be funded by the Series 2008-1 Noteholders. The Administrative Agent shall promptly forward any such Funding Notice, with the attached Asset Base Certificate, to each Series 2008-1 Noteholder or its designee. On any Business Day requested by the Issuer, and presuming that the Issuer shall have

 

 

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satisfied all applicable conditions precedent set forth in Article V hereof, the Series 2008-1 Noteholders shall, subject to the terms and conditions of this Supplement and the Series 2008-1 Note Purchase Agreement, deposit into the account designated by the Issuer by wire transfer of same day funds not later than 1:00 p.m. (New York City time) an amount equal to its Percentage of the requested Series 2008-1 Advance; provided, however, that each Series 2008-1 Advance by each Series 2008-1 Noteholder shall be for: (I) a minimum amount of the lesser of (x) its then unused Series 2008-1 Note Existing Commitment and (y) such Series 2008-1 Noteholder’s Percentage of one million Dollars ($1,000,000) or an integral multiple of One Hundred Thousand Dollars ($100,000) in excess thereof; and (II) a maximum amount of the Availability of such Series 2008-1 Noteholder on such Business Day. In the event that any Series 2008-1 Noteholder fails to make a Series 2008-1 Advance in accordance with its Series 2008-1 Note Existing Commitment, the other Series 2008-1 Noteholder(s) may but shall not be obligated to fund the Percentage of the defaulted Series 2008-1 Noteholder(s).

Each request for a Series 2008-1 Advance shall constitute a reaffirmation by the Issuer that (1) no Event of Default or Early Amortization Event has occurred and is continuing, (2) all of the conditions precedent set forth in Article V hereof have been satisfied and (3) except for any divergences previously disclosed in writing to the Indenture Trustee and consented to in writing by the Administrative Agent, the representations and warranties made by the Issuer to the Holders of Series 2008-1 Notes contained in the Series 2008-1 Transaction Documents are true, correct and complete in all material respects to the same extent as though made on and as of the date of the request, except to the extent such representations and warranties specifically relate to an earlier date, in which event they shall be true, correct and complete in all material respects as of such earlier date.

If (i) any Series 2008-1 Advance requested by the Issuer is not, for any reason whatsoever related to a default or nonperformance by the Issuer, made or effectuated on the date specified therefor or (ii) any optional prepayment of the Series 2008-1 Notes is not made when specified in the notice delivered pursuant to Section 204(b) hereof, then, in either such case, the Issuer shall indemnify each Series 2008-1 Noteholder against any Breakage Costs relating thereto.

(c) Commitment Fee. On each Payment Date, the Issuer shall pay a commitment fee (the “Commitment Fee”) to each Series 2008-1 Noteholder in an amount equal to the sum for each day during the immediately preceding Collection Period of the product of (x) the applicable Commitment Fee Percentage on such day, (y) a fraction (expressed as percentage) the numerator of which is one and the denominator of which is equal to 360 and (z) the Series 2008-1 Unused Commitment of such Series 2008-1 Noteholder on such day. Such Commitment Fee shall be payable from amounts then on deposit in the Series 2008-1 Series Account, or amounts otherwise available for such purpose, in accordance with Section 302 hereof.

(d) Optional Increase in Series 2008-1 Note Existing Commitments. The Issuer may, by means of a letter delivered to Administrative Agent and the Indenture Trustee on not more than five (5) occasions prior to the Conversion Date, request that the aggregate Series 2008-1 Note Existing Commitments be increased by an aggregate amount not to exceed One Hundred Twenty Five Million Dollars ($125,000,000), by (a) increasing the commitment of one or more then existing Series 2008-1 Noteholders that have agreed to such increase and/or (b)

 

 

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by issuing additional Series 2008-1 Notes to adding one or more commercial banks, finance companies or other Persons acceptable to the Issuer (each an “Additional Series 2008-1 Noteholder”) with a Series 2008-1 Note Existing Commitment in an amount agreed to by any such Additional Series 2008-1 Noteholder; provided that until such time as the Series 2008-1 Note Existing Commitment of Fortis shall have been reduced to Seventy Five Million Dollars ($75,000,000), any incremental additional commitments that may become available to the Issuer pursuant to this Section 205(d) shall be used to decrease the commitment of Fortis. Any such increase in the aggregate Series 2008-1 Note Existing Commitment made in accordance with this Section 205(d) shall be effective three Business Days after the date on which Issuer has delivered to the Administrative Agent and the Indenture Trustee the Increase Letter (as such term is defined in the Series 2008-1 Note Purchase Agreement) (in the case of an increase in the Commitments of an existing Series 2008-1 Noteholder) or Related Group Additional Notice (as such term is defined in the Series 2008-1 Note Purchase Agreement) (in the case of the addition of an Additional Series 2008-1 Noteholders). If the Issuer pays or agrees to pay to any Series 2008-1 Noteholder or Additional Series 2008-1 Noteholder, any increased Commitment Fee and/or Applicable Margin, then the terms of this Supplement shall automatically be amended with the effect that the amount of such increased Commitment Fee and/or Applicable Margin shall be payable on a prospective basis to all then existing Series 2008-1 Noteholders.

Section 206. Taxes.

(a) Subject to clause (g) below, in addition to payments of principal and interest on the Series 2008-1 Notes when due, the Issuer shall pay, but only in accordance with the priorities for distributions set forth in Section 302 hereof, each Series 2008-1 Noteholder (an “Indemnified Party”) any and all present or future taxes, fees, duties, levies, imposts, or charges, or any other similar deduction or withholding, whatsoever imposed by any Governmental Authority, and all liabilities with respect thereto, excluding (i) franchise taxes, (ii) such taxes as are imposed on or measured by or determined (in whole or in part) by reference to each Indemnified Party’s net income by the jurisdiction under the laws of which such Indemnified Party, as the case may be (regardless of whether such tax is denominated as an “income tax” under applicable local law), is organized or maintains an office or any political subdivision thereof, (iii) any other taxes, fees, duties, levies, imports, or charges, whether payable directly by the Series 2008-1 Noteholder or by deduction or withholding from any payment made in respect of a Series 2008-1 Note, on account of a connection, whether present or former, between the Series 2008-1 Noteholder and the relevant taxing jurisdiction and (iv) withholding taxes imposed on any payment in respect of a Series 2008-1 Note other than on account of a change in law or regulation occurring after the Person in respect of which such tax is imposed acquired a beneficial interest in a Series 2008-1 Note (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as “Taxes”).

(b) In addition subject to clause (g) below, the Issuer shall pay, but only in accordance with the priorities for distribution set forth in Section 302 hereof, any present or future stamp or documentary taxes or any other similar excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Supplement or any other Series 2008-1 Transaction Document (hereinafter referred to as “Other Taxes”).

 

 

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(c) Subject to clause (g) below, if any Taxes or Other Taxes are directly asserted or imposed against any Indemnified Party, the Issuer shall indemnify and hold harmless such Indemnified Party, but only in accordance with the priorities for distribution set forth in Section 302 hereof, for the full amount of the Taxes or Other Taxes (including any Taxes or Other Taxes asserted or imposed by any jurisdiction on amounts payable under this Section 206) paid by the Indemnified Party and any liability (including penalties, interest, additions to tax and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted or imposed. If the Issuer fails to pay any Taxes or Other Taxes when due to the appropriate taxing authority or fails to remit to the Indemnified Party the required receipts or other required documentary evidence, the Issuer shall indemnify the Indemnified Party for any incremental Taxes or Other Taxes, interest or penalties that may become payable by the Indemnified Party as a result of any such failure. Payment under this indemnification shall be made in accordance with the payment priorities set forth in Section 302 hereof after the Indemnified Party makes written demand therefor. Each Indemnified Party shall give prompt notice to the Issuer of any assertion of Taxes or Other Taxes so that the Issuer may, at its option, contest such assertion.

(d) Within thirty (30) days after the date of any payment by the Issuer of Taxes or Other Taxes, the Issuer shall furnish to the affected Indemnified Party the original (or a certified copy) of a receipt evidencing payment thereof, or other evidence of payment thereof satisfactory to such Indemnified Party.

(e) Taxes, Other Taxes and other indemnification payments owing pursuant to the provisions of this Section 206 shall not constitute a “claim” (as defined in Section 101(5) of the Bankruptcy Code) against the Issuer in the event there are insufficient funds available to make such payments in accordance with the payment priority set forth in Section 302 hereof.

(f) If an Indemnified Party is not a “United States person” as defined in section 7701(a)(30) of the Internal Revenue Code of 1986, as amended, such Indemnified Party shall deliver to the Issuer, with a copy to the Administrative Agent and the Manager, within 15 days after the Closing Date, or, if such Indemnified Party becomes an Indemnified Party after the Closing Date, the date on which such Indemnified Party becomes an Indemnified Party hereunder: (i) two (or such other number as may from time to time be prescribed by Applicable Laws) duly completed copies of (A) IRS Form W-8BEN claiming eligibility of the Indemnified Party for benefits of an income tax treaty to which the United States is a party or (B) IRS Form W-8ECI (or any successor forms or other certificates or statements that may be required from time to time by the relevant United States taxing authorities or Applicable Laws) or (ii) in the case of an Indemnified Party that is not legally entitled to deliver either form listed in clause (f)(i), (A) a certificate of a duly authorized officer of such Indemnified Party to the effect that such Indemnified Party is not (x) a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (y) a “10 percent shareholder” of the Issuer within the meaning of Section 881(c)(3)(B) of the Code, or (z) a controlled foreign corporation receiving interest from a related person within the meaning of Section 881(c)(3)(C) of the Code (such certificate, an “Exemption Certificate”) and (B) two duly completed copies of IRS Form W-8BEN or applicable successor form certifying the foreign status of such Indemnified Party, as appropriate, to permit the Issuer to make payments hereunder for the account of such Indemnified Party, without deduction or withholding of United States federal income or similar Taxes. Each other Indemnified Party

 

 

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agrees to deliver to the Issuer, with a copy to the Administrative Agent and the Manager, within 15 days after the Closing Date, or, if such Indemnified Party becomes an Indemnified Party after the Closing Date, the date on which such Indemnified Party becomes an Indemnified Party hereunder, one or more accurate and complete original signed copies (as the Issuer, Administrative Agent or Manager may reasonably request) of IRS Form W-9 or successor applicable form (if required by law), as the case may be, providing the employer identification number for such Indemnified Party. Additionally, upon the obsolescence of, or after the occurrence of any event requiring a change in, any form or certificate previously delivered by an Indemnified Party pursuant to this Section 206(f), such Indemnified Party shall deliver such forms, amended or successor forms, certificates or statements as may be required under Applicable Laws to permit the Issuer to make payments hereunder for the account of such Indemnified Party, without deduction or withholding of United States federal income or similar Taxes.

(g) The Issuer shall not be obligated to pay any additional amounts to any Indemnified Party pursuant to clause (a), or to indemnify any Indemnified Party pursuant to clause (c), in respect of United States federal withholding taxes to the extent imposed as a result of (i) the failure of such Indemnified Party to deliver to the Issuer any form and/or Exemption Certificate pursuant to clause (f), (ii) such form not establishing a complete exemption from U.S. federal withholding tax or the information or certifications made therein by the Indemnified Party being untrue or inaccurate on the date delivered in any material respect, or (iii) the Indemnified Party designating a successor office at which it maintains the Series 2008-1 Notes which has the effect of causing such Indemnified Party to become obligated for tax payments in excess of those in effect immediately prior to such designation; provided, however, that the Issuer shall be obligated to pay additional amounts to any such Indemnified Party pursuant to clause (a), and to indemnify any such Indemnified Party pursuant to clause (c), in respect of United States federal withholding taxes if (i) any such failure to deliver a form and/or Exemption Certificate or the failure of such form to establish a complete exemption from U.S. federal withholding tax or inaccuracy or untruth contained therein resulted from a change in any applicable law or regulation occurring after the date the Person in respect of which such tax is imposed acquired a beneficial interest in a Series 2008-1 Note, which change rendered such Indemnified Party no longer legally entitled to deliver any such form or otherwise ineligible for a complete exemption from U.S. federal withholding tax, or rendered the information or certifications made in such form untrue or inaccurate in a material respect or (ii) the redesignation of the Indemnified Party’s office for maintenance of the Series 2008-1 Notes was made at the request of the Issuer.

(h) Any Indemnified Party that becomes entitled to the payment of additional amounts pursuant to Section 206(a) shall use reasonable efforts (consistent with applicable law) to file any document reasonably requested by the Issuer or to transfer its interest in the Series 2008-1 Note to an Affiliate in another jurisdiction if the making of such a filing or transfer to an Affiliate, as the case may be, would avoid the need for or reduce the amount of any payment of such additional amounts that may thereafter accrue and would not, in the good faith determination of such Indemnified Party, be disadvantageous to it.

 

 

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(i) If an Indemnified Party receives any refund or is entitled to a Tax credit with respect to Taxes for which the Issuer has paid any additional amounts pursuant to Section 206(a) or Section 206(b) or made an indemnity payment pursuant to Section 206(c), then such Indemnified Party shall promptly pay the Issuer the portion of such refund or credit and any interest received with respect thereto as it determines, in its reasonable, good faith judgment will leave it after such payment, in no better or worse financial position than it would have been absent the imposition of such Taxes and the payment by the Issuer of such indemnity or additional amounts pursuant to this Section 206; provided, however, that (i) the Issuer agrees to promptly return any amount paid to the Issuer pursuant to this Section 206(i) upon notice from such Indemnified Party that such refund or any portion thereof is required to be repaid to the relevant taxing authority, (ii) nothing in this Section 206(i) shall require an Indemnified Party to disclose any confidential information to the Issuer (including, without limitation, its tax returns), and (iii) no Indemnified Party shall be required to pay any amounts pursuant to this Section 206(i) at any time which an Event of Default exists and is continuing.

(j) If the Issuer determines in good faith that a reasonable basis exists for contesting any Taxes for which additional amounts have been paid pursuant to Section 206(a) or Section 206(b) or an indemnity payment has been made pursuant to Section 206(c), the Indemnified Party (to the extent such Person reasonably determines in good faith that it will not suffer a material adverse effect as a result thereof) shall cooperate with the Issuer in challenging such Taxes, at the Issuer’s expense, if so requested by the Issuer in writing.

Section 207. Increased Costs. If either (i) the introduction of or any change (including, without limitation, any change by way of imposition or increase of reserve requirements) after the Closing Date in or in the interpretation of any law or regulation (including any law or regulation of any accounting board or authority (whether or not a part of the government) which is responsible for the establishment or interpretation of national or international accounting principles, in each case foreign or domestic) or (ii) the compliance by an Indemnified Party with any guideline or request promulgated or made after the Closing Date from any central bank or other Governmental Authority (whether or not having the force of law), shall (A) impose, modify or deem applicable any reserve requirement (including, without limitation, any reserve requirement imposed by the Federal Reserve Board, but excluding any reserve requirement, if any, included in the determination of the Adjusted Eurodollar Rate), special deposit or similar requirement against assets of, deposits with or for the amount of, or credit extended by, any Indemnified Party, or (B) impose any other condition affecting the commitments or rights of an Indemnified Party under any Series 2008-1 Transaction Document, the result of which is to increase the cost to such Indemnified Party or to reduce the amount of any sum received or receivable by an Indemnified Party under any Series 2008-1 Transaction Document, then, within ten (10) days after demand by such Indemnified Party (which demand shall be accompanied by a statement setting forth the basis for such demand), the Issuer shall pay directly to such affected Indemnified Party such additional amount or amounts as will compensate such Indemnified Party for such additional or increased cost incurred or such reduction suffered but only in accordance with the payment priority set forth in Section 302 hereof. In determining any amount provided for in this Section 207, the Indemnified Party may use any reasonable averaging and attribution methods. Any Indemnified Party making a claim under this section shall submit to the Issuer and the Manager a written description as to such additional or increased cost or reduction and the calculation thereof, which written description shall be conclusive absent demonstrable error. Prior to making any claim pursuant to the provisions of this Section 207, the affected Indemnified Party will use reasonable efforts to

 

 

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mitigate or eliminate the amount of such Increased Cost or reduced amount if such mitigation effects are not, in the judgment of the affected Indemnified Party, illegal or otherwise disadvantageous to such Indemnified Party. The provisions of this Section 207 shall also be applicable to each Liquidity Provider.

Payments owing pursuant to the provisions of this Section 207 shall be made only in accordance with the priorities for distributions set forth in Section 302 hereof. Increased Costs and other amounts owed pursuant to this Section 207 shall not constitute a “claim” (as defined in Section 101(5) of the Bankruptcy Code) against the Issuer in the event that there are insufficient funds available to meet such payments in accordance with Section 302 hereof. The provisions of this Section 208 shall also be applicable to each Liquidity Provider.

The failure or delay on the part of any Indemnified Party to demand compensation for any Increased Costs shall not constitute a waiver of such Series 2008-1 Noteholder’s right to demand such compensation; provided, that the Issuer shall not be under any obligation to compensate any Indemnified Party under this Section 207 for any Increased Costs and other amounts owed pursuant to this Section 207 with respect to any period prior to the date that is 120 days prior to such request if such Indemnified Party knew of the circumstances giving rise to such Increased Costs and other amounts owed pursuant to this Section 207 and of the fact that such circumstances would result in a claim for increased compensation by reason of such Increased Costs and other amounts owed pursuant to this Section 207.

Section 208. Capital Requirements.

If any Indemnified Party shall determine that (i) any change after the Closing Date in any law, rule, regulation or guideline adopted pursuant to or arising out of the July 1988 report of the Basel Committee on Banking Regulations and Supervisory Practices entitled “International Convergence of Capital Measurement and Capital Standards”, or (ii) the adoption after the date hereof of any other law or requirement of law regarding capital adequacy, including the proposed “The New Basel Capital Accord”, or (iii) any change after the Closing Date in any of the foregoing or in the enforcement or interpretation or administration of any of the foregoing by any Governmental Authority charged with the enforcement or interpretation or administration thereof, or (iv) compliance by any Indemnified Party (or any business office of the Indemnified Party) or the Indemnified Party’s holding company with any request or directive regarding capital adequacy of any Governmental Authority, has or would have the effect of reducing the rate of return on the Indemnified Party’s capital or on the capital of the Indemnified Party’s holding company, to a level below that which the Indemnified Party or the Indemnified Party’s holding company could have achieved, in each case but for such adoption, change or compliance (taking into consideration the Indemnified Party’s policies and the policies of the Indemnified Party’s holding company with respect to capital adequacy) by an amount reasonably deemed by the Indemnified Party to be material, then, within (10) ten days after written demand for the payment thereof, then the Issuer will pay to the affected Indemnified Party such additional amount or amounts as will compensate the Indemnified Party or the Indemnified Party’s holding company for any such reduction suffered. Payment under this indemnification shall be made only in accordance with the priorities for distributions set forth in Section 302 hereof after the Indemnified Party makes written demand therefor. Indemnification amounts contemplated by this Section shall not constitute a “claim” (as defined in Section 101(5) of the

 

 

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Bankruptcy Code) against the Issuer in the event there are insufficient funds available to make such payments on a Payment Date under Section 302 hereof. Without affecting its rights under this Section 208 or any other provision of this Supplement, each Indemnified Party agrees that if there is a reduction in a rate of return with respect to which the Issuer would be obligated to compensate the Indemnified Party pursuant to this Section 208, the Indemnified Party shall use reasonable efforts to select an alternative business office which would not result in any reduction in rate of return contemplated by this Section; provided, however, that the Indemnified Party shall not be obligated to select an alternative business office if the Indemnified Party determines that (i) as a result of such selection the Indemnified Party would be in violation of any Applicable Law, or would incur additional costs or expenses, or (ii) such selection would be unavailable for regulatory reasons or (iii) such selection would otherwise be illegal or disadvantageous to such Indemnified Party.

The failure or delay on the part of any Indemnified Party to demand compensation for any reduction in amounts received or receivable or reduction in return on capital shall not constitute a waiver of such Series 2008-1 Noteholder’s right to demand such compensation; provided, that the Issuer shall not be under any obligation to compensate any Indemnified Party under this Section 208 for any reductions with respect to any period prior to the date that is 120 days prior to such request if such Indemnified Party knew of the circumstances giving rise to such reductions and of the fact that such circumstances would result in a claim for increased compensation by reason of such reductions.

Section 209. Replacement of Series 2008-1 Noteholder.

(a) In the event (i) any Series 2008-1 Noteholder (or any Indemnified Party with respect to any Series 2008-1 Noteholder) delivers a certificate requesting compensation pursuant to Section 206 or Section 207 or Section 208 hereof, (ii) the Issuer is required to pay any additional amount to any Series 2008-1 Noteholder (or any Indemnified Party with respect to any Series 2008-1 Noteholder) or any Governmental Authority on account of any Series 2008-1 Noteholder (or any Indemnified Party with respect to any Series 2008-1 Noteholder) pursuant to Section 206 or (iii) any Series 2008-1 Noteholder does not consent (or fails to respond) to a proposed amendment, modification or waiver to any provision of this Supplement or any other Transaction Document requested by the Issuer (and the Issuer has satisfied all other conditions precedent to such amendment or waiver but for receiving the consent of such Series 2008-1 Noteholder), the Issuer may, at its sole expense and effort, upon notice to such Series 2008-1 Noteholder, require such Series 2008-1 Noteholder to transfer and assign, without recourse (in accordance with and subject to the restrictions contained in the Indenture), all of its interests, rights and obligations under this Supplement and the other Transaction Documents to an assignee that shall assume such assigned obligations (which assignee may be another Series 2008-1 Noteholder, if a Series 2008-1 Noteholder accepts such assignment); provided that:

(i) such Series 2008-1 Noteholder shall have received payment of an amount equal to the outstanding principal of its Series 2008-1 Note, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Transaction Documents from the Issuer or the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Issuer (in the case of all other amounts);

 

 

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(ii) in the case of any such assignment resulting from a claim for compensation under Section 207 or 208 or payments required to be made pursuant to Section 206, such assignment will result in a reduction in such compensation or payments thereafter; and

(iii) such assignment does not conflict with Applicable Law.

ARTICLE III

Series 2008-1 Series Account and

Allocation and Application of Amounts Therein

Section 301. Series 2008-1 Series Account. The Issuer shall establish on the Closing Date and maintain, so long as any Series 2008-1 Note is Outstanding, an Eligible Account in the name of the Issuer with the Indenture Trustee which shall be designated as the Series 2008-1 Series Account, which account shall be pledged to the Indenture Trustee pursuant to the Indenture for the benefit of the Series 2008-1 Noteholders and any Hedge Counterparty. The Series 2008-1 Series Account shall only be relocated to another financial institution in accordance with the express provisions of Section 303(d) of the Indenture. All deposits of funds by, or for the benefit of, the Series 2008-1 Noteholders from the Trust Account and the Restricted Cash Account (if such account has been opened), shall be accumulated in, and withdrawn from, the Series 2008-1 Series Account in accordance with the provisions of the Indenture and this Supplement.

Section 302. Distributions from Series 2008-1 Series Account. On each Payment Date, the Indenture Trustee shall distribute funds then on deposit in the Series 2008-1 Series Account in accordance with the provisions of one of subsection (I), (II) and (III) of this Section 302.

(I) If no Early Amortization Event nor an Event of Default shall have occurred and be continuing:

(a) To each Series 2008-1 Noteholder on the immediately preceding Record Date, an amount equal to its pro rata portion of the Series 2008-1 Interest Payment for such Payment Date;

(b) To each Series 2008-1 Noteholder on the immediately preceding Record Date, an amount equal to its pro rata portion of the Commitment Fee for such Payment Date;

(c) To each Series 2008-1 Noteholder on the immediately preceding Record Date, an amount equal to its pro rata portion of the Minimum Principal Payment Amount then due and payable to Series 2008-1 Noteholders on such Payment Date;

(d) To each Series 2008-1 Noteholder on the immediately preceding Record Date, an amount equal to its pro rata portion of the Scheduled Principal Payment Amount then due and payable to Series 2008-1 Noteholders on such Payment Date;

 

 

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(e) To each Series 2008-1 Noteholder on the immediately preceding Record Date, an amount equal to its pro rata portion (if any) of the Supplemental Principal Payment Amount then due and payable to Series 2008-1 Noteholders on such Payment Date, until the Aggregate Series 2008-1 Note Principal Balance has been reduced to zero;

(f) To each Series 2008-1 Noteholder on the immediately preceding Record Date and each other Indemnified Party, pro rata, an amount equal to any Indemnity Amounts, Default Fees and any other amounts then due and payable to such Series 2008-1 Noteholders and each other Indemnified Party pursuant to the Series 2008-1 Transaction Documents; and

(g) After application of the amounts required to be paid pursuant to Section 302 of the Indenture, to the Guarantor, an amount equal to any reimbursements owing to the Guarantor pursuant to the terms of the Guaranty and then to the Issuer or its assigns, any remaining amounts then on deposit in the Series 2008-1 Series Account.

(II) If an Early Amortization Event shall have occurred and then be continuing with respect to any Series but no Event of Default shall have occurred and be continuing with respect to any Series (or an Event of Default has occurred but the Notes have not been accelerated in accordance with Section 802 of the Indenture):

(a) To each Series 2008-1 Noteholder on the immediately preceding Record Date, an amount equal to its pro rata portion of the Series 2008-1 Interest Payment for such Payment Date;

(b) To each Series 2008-1 Noteholder on the immediately preceding Record Date, an amount equal to its pro rata portion of the Commitment Fee for such Payment Date;

(c) To each Series 2008-1 Noteholder on the immediately preceding Record Date, an amount equal to its pro rata portion of the Minimum Principal Payment Amount then due and payable to Series 2008-1 Noteholders on such Payment Date;

(d) To each Series 2008-1 Noteholder on the immediately preceding Record Date, an amount equal to its pro rata portion of the Scheduled Principal Payment Amount then due and payable to Series 2008-1 Noteholders on such Payment Date;

(e) To each Series 2008-1 Noteholder on the immediately preceding Record Date, an amount equal to its pro rata portion of the then Aggregate Series 2008-1 Principal Balance until the Aggregate Series 2008-1 Principal Balance has been reduced to zero;

 

 

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(f) To each Series 2008-1 Noteholder on the immediately preceding Record Date, pro rata (based on respective amounts due), an amount equal to any Indemnity Amounts and Default Fees and any other amounts then due and payable by the Issuer to the Series 2008-1 Noteholders pursuant to the Series 2008-1 Transaction Documents; and

(g) After application of the amounts required to be paid pursuant to Section 302 of the Indenture, to the Guarantor, an amount equal to any reimbursement owing to the Guarantor pursuant to the terms of the Guaranty and then to the Issuer or its assigns, any remaining amounts then on deposit in the Series 2008-1 Series Account.

(III) If an Event of Default shall then be continuing with respect to any Series and the Notes of any Series have been declared due and payable and such declaration and its consequences have not been rescinded or annulled:

(a) To each Series 2008-1 Noteholder on the immediately preceding Record Date, an amount equal to its pro rata portion of the Series 2008-1 Interest Payment for such Payment Date;

(b) To each Series 2008-1 Noteholder on the immediately preceding Record Date on a pro rata basis, an amount equal to the then Aggregate Series 2008-1 Principal Balance until the Series 2008-1 Notes are paid in full;

(c) To each Series 2008-1 Noteholder on the immediately preceding Record Date, pro rata (based on respective amounts due), an amount equal to any Indemnity Amounts and Default Fees and any other amounts then due and payable by the Issuer to the Series 2008-1 Noteholders pursuant to the Series 2008-1 Transaction Documents; and

(d) After application of the amounts required to be paid pursuant to Section 302 of the Indenture, to the Guarantor, an amount equal to any reimbursement owing to the Guarantor pursuant to the terms of the Guaranty and then to the Issuer or its assigns, any remaining amounts then on deposit in the Series 2008-1 Series Account.

Any amounts payable to a Series 2008-1 Noteholder or Guarantor pursuant to this Section 302 shall be made by wire transfer of immediately available funds to the account that such Series 2008-1 Noteholder has designated to the Indenture Trustee in writing at least five Business Days prior to the applicable Payment Date.

 

 

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ARTICLE IV

Additional Covenants; Additional Events of Default

In addition to the covenants set forth in Article VI of the Indenture, the Issuer hereby makes the following additional covenants for the benefit of the Series 2008-1 Noteholders:

Section 401. Increase in the Aggregate Series 2008-1 Note Existing Commitment. The Issuer shall not issue on or after the Closing Date any additional Series 2008-1 Notes pursuant to this Supplement or otherwise increase the aggregate Series 2008-1 Note Existing Commitment without (a) complying with the provisions of Section 205(d) hereof with respect to each such increase in the Series 2008-1 Note Existing Commitment, and (b) receipt by the Indenture Trustee and the Administrative Agent of a certificate from an officer of the Issuer stating that no Early Amortization Event, Manager Default or Event of Default has occurred and is then continuing or would result from the issuance of such new Series. Nothing contained in this Section 401 shall prohibit the assignment by any Series 2008-1 Noteholder of all or a portion of its Series 2008-1 Note Existing Commitment if, after giving effect to such assignment, the aggregate Series 2008-1 Note Existing Commitment shall not have increased.

Section 402. Issuance of Additional Series of Notes. So long as the Series 2008-1 Supplement and related Series 2008-1 Transaction Documents remain in full force and effect, the Issuer shall not issue any additional Series of Notes without the prior written consent of the Control Party for Series 2008-1.

Section 403. Use of Proceeds. The proceeds from the issuance of the Series 2008-1 Notes shall be used as follows: (i) to acquire Containers and Related Assets, (ii) to pay the costs of issuance of the Series 2008-1 Notes and (iii) for general corporate purposes. For avoidance of doubt, the Issuer may use the proceeds of any Series 2008-1 Advance to make payments on, or in respect of, any other Series of Notes.

Section 404. Consent of the Majority of Holders. So long as no Rating Agency maintains an effective rating with respect to the Series 2008-1 Notes, the Issuer shall not take, and will cause others acting on behalf of the Issuer to not take, any action that requires satisfaction of the Rating Agency Condition as a condition precedent unless such action shall have also been approved by the Majority of Holders of the Series 2008-1 Notes.

Section 405. United States Federal Income Tax Election. The Issuer shall not elect to be classified as an association taxable as a corporation under Section 301.7701-3 of the Treasury Regulations.

Section 406. Additional Event of Default. In addition to the events and conditions set forth in Section 801 of the Indenture, the occurrence of any of the following events or conditions shall also constitute an Event of Default with respect to the Series 2008-1 Notes:

(1) default in the payment on any Payment Date of any Scheduled Principal Payment Amount then due and payable on any Series 2008-1 Notes and the continuation of such default for more than three (3) Business Days;

(2) an involuntary case is commenced under the Bankruptcy Code against the Guarantor and the petition is not controverted within 10 days, or is not dismissed within 60 days, after commencement of the case, or a decree or order for relief by a court having jurisdiction in respect of the Guarantor is entered appointing a receiver, liquidator, assignee, custodian, trustee, or sequestrator (or other similar official) for the Guarantor or

 

 

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for any substantial part of its properties, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of sixty (60) consecutive days;

(3) the commencement by the Guarantor of a voluntary case under any applicable Insolvency Law, or other similar law now or hereafter in effect, or the consent by the Issuer to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee or sequestrator (or other similar official) of the Guarantor, or any substantial part of its properties, or the making by the Guarantor of any general assignment for the benefit of creditors, or the failure by the Guarantor generally to pay its debts as they become due, or the taking of corporate action by the Issuer in furtherance of any such action;

(4) the rendering against the Guarantor of a final, non-appealable judgment, decree or order for the payment of money in excess of Twenty Million Dollars ($20,000,000), (to the extent not paid when due or covered by a reputable and solvent insurance company, with any portion of such judgment, decree or order not so paid or not so covered, as applicable, to be included in the determination of the dollar amount specified in this clause (4)) which judgment, decree or order results in a claim that would entitle the claimholder to petition for the involuntary bankruptcy of the Guarantor under the Bankruptcy Code, and the continuance of such judgment, decree or order for a period of 60 consecutive days;

(5) the Guarantor or any of its subsidiaries fails to make any payment when due (beyond the applicable grace or cure period with respect thereto, if any) or defaults in the observance or performance (beyond the applicable grade or cure period with respect thereto, if any) of any payment obligation, or any other agreement or covenant with respect to the Indebtedness that, individually or in the aggregate for all such Persons, exceeds Twenty Million Dollars ($20,000,000) and the holder(s) of such Indebtedness have accelerated such Indebtedness;

(6) any law, rule or regulation shall render invalid, or preclude enforcement of, any material provision of the Guaranty or impair performance of the obligations of the Guarantor under the Guaranty, for any reason other than any action taken by the Indenture Trustee or any Series 2008-1 Noteholder or the failure of the Indenture Trustee or any Series 2008-1 Noteholder to take any action within its control; and

(7) the Guarantor shall repudiate or attempt to repudiate its obligations under the Guaranty.

ARTICLE V

Conditions of Closing and Future Lending

Section 501. Conditions to Closing. The effectiveness of this Supplement is subject to the condition precedent that the Indenture Trustee and the Administrative Agent (other than with respect to the items listed in clause (a) below) shall have received all of the following, each duly executed and dated on or as of the Closing Date, in form and substance satisfactory to each of the Series 2008-1 Noteholders.

 

 

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(a) Series 2008-1 Note. A separate Series 2008-1 Note executed by the Issuer in favor of each Series 2008-1 Noteholder in the stated principal amount equal to the Series 2008-1 Note Initial Commitment of each such Series 2008-1 Noteholder.

(b) Certificate(s) of Secretary or Assistant Secretary. Separate certificates executed by the corporate secretary or assistant secretary of TAL and the Issuer, each dated the Closing Date, certifying (i) that the respective company has the authority to execute and deliver, and perform its respective obligations under each of the Series 2008-1 Transaction Documents to which it is a party, and (ii) that attached are true, correct and complete copies of the organizational documents, authorizations and incumbency certificates in form and substance satisfactory to the Series 2008-1 Noteholders as to such matters as they shall require.

(c) Security Documents. The Indenture, the Contribution and Sale Agreement and the Management Agreement, each in form and substance satisfactory to the Series 2008-1 Noteholders, shall have been executed and delivered by the Issuer and all other parties thereto and filed in the appropriate jurisdictions, together with all Uniform Commercial Code financing statements and documents of similar import in other jurisdictions specified in Section 2.03(a) of the Contribution and Sale Agreement.

(d) Opinions of Counsel. Opinions of Counsel to the Issuer, as to perfection of the Indenture Trustee’s security interest in the Collateral and enforceability of the Transaction Documents and from counsel to the Issuer, Seller and Manager, in form and in substance satisfactory to the Administrative Agent, the Series 2008-1 Noteholders, as to such matters as they shall require.

(e) Certificate as to Containers. An Officer’s Certificate from the Manager certifying that it is managing all of the Containers in accordance with the Management Agreement.

(f) Series 2008-1 Transaction Documents. The Series 2008-1 Transaction Documents (other than Interest Rate Hedge Agreements) shall have been duly executed and delivered and all of the conditions precedent therein have either been satisfied or waived by the Administrative Agent.

(g) Insurance. The Issuer shall have delivered certificates evidencing the insurance coverage described in Section 3.9 of the Management Agreement.

(h) Issuance of Guaranty. The Guaranty has been issued and is in full force and effect.

Notwithstanding the foregoing conditions precedent, upon the making of any advance by a Noteholder, all of the Indenture Trustee’s and Noteholders’ rights under the Indenture and this Supplement shall vest in such Persons, whether or not the conditions precedent were in fact satisfied.

 

 

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Section 502. Advances on Series 2008-1 Notes. The obligation of each of the Series 2008-1 Noteholders to make a Series 2008-1 Advance pursuant to its commitment under this Supplement and the Series 2008-1 Note Purchase Agreement is subject to the following further conditions precedent being fulfilled with respect to each such Series 2008-1 Advance:

(a) Default. Before and after giving effect to such Series 2008-1 Advance, no Event of Default shall have occurred and be continuing unless such Series 2008-1 Advance has been approved by each Series 2008-1 Noteholder.

(b) Early Amortization Event. Before and after giving effect to such Series 2008-1 Advance, no Early Amortization Event shall have occurred and be continuing unless such Series 2008-1 Advance has been approved by each Series 2008-1 Noteholder.

(c) Asset Base Imbalance. Before and after giving effect to such Series 2008-1 Advance, the Aggregate Note Principal Balance (calculated after giving effect to such Series 2008-1 Advance) does not exceed the Asset Base (calculated to give effect to the Eligible Containers to be acquired with the proceeds of such Series 2008-1 Advance).

(d) Asset Base Certificate and Funding Notice. The Issuer shall have delivered to the Administrative Agent (with a copy to the Indenture Trustee) (i) a duly completed and executed Funding Notice and (ii) simultaneously with the delivery of such Funding Notice, a duly completed and executed Asset Base Certificate (which shall give effect to any Eligible Containers to be acquired with the proceeds of such Series 2008-1 Advance).

(e) Conversion Date. The Conversion Date shall not have occurred.

(f) Note Purchase Agreement. All conditions precedent to such Series 2008-1 Advance set forth in the Series 2008-1 Note Purchase Agreement have been met.

(g) Discharge of Existing Indebtedness. If the Issuer requests that the proceeds of such Series 2008-1 Advance be used in whole or in part to discharge in full any undischarged Liens on the Containers to be acquired on such date, the Funding Notice (as defined in the Series 2008-1 Note Purchase Agreement) shall include the name of the related lienholders and their related wiring instructions.

ARTICLE VI

Representations and Warranties

The Issuer hereby represents and warrants (as of the Closing Date and each date on which a Series 2008-1 Advance is made) to the Series 2008-1 Noteholders and the Indenture Trustee that:

Section 601. Existence. The Issuer is a limited liability company duly organized, validly existing and in compliance under the laws of Delaware. The Issuer is in good standing and is duly qualified to do business in each jurisdiction where the failure to do so would reasonably be expected to have a material adverse effect upon the Issuer, and has all licenses, permits, charters and registrations the failure to hold which would reasonably be expected to have a material adverse effect on the Issuer.

 

 

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Section 602. Authorization. The Issuer has the power and is duly authorized to execute and deliver this Supplement, the Indenture and the other Series 2008-1 Transaction Documents to which it is a party; the Issuer is and will continue to be duly authorized to borrow monies under this Supplement, the Indenture and the other Series 2008-1 Transaction Documents; and the Issuer is and will continue to be authorized to perform its obligations under this Supplement, the Indenture and the other Series 2008-1 Transaction Documents. The execution, delivery and performance by the Issuer of this Supplement, the Indenture and the other Series 2008-1 Transaction Documents to which it is a party and the borrowings hereunder do not and will not require any consent or approval of any Governmental Authority, stockholder or any other Person which has not already been obtained.

Section 603. No Conflict; Legal Compliance. The execution, delivery and performance of this Supplement, the Indenture and each of the other Series 2008-1 Transaction Documents and the execution, delivery and payment of the Series 2008-1 Notes will not: (a) contravene any provision of Issuer’s charter documents or by-laws or other organizational documents; (b) contravene, conflict with or violate any applicable law or regulation, or any order, writ, judgment, injunction, decree, determination or award of any Governmental Authority; or (c) violate or result in the breach of, or constitute a default under this Supplement, the Indenture, the other Series 2008-1 Transaction Documents, any other indenture or other loan or credit agreement, or other agreement or instrument to which Issuer is a party or by which Issuer, or its property and assets may be bound or affected. Issuer is not in violation or breach of or default under any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or any contract, agreement, lease, license, indenture or other instrument to which it is a party, in each case, in a manner that would reasonably be expected to result in a Material Adverse Change.

Section 604. Validity and Binding Effect. This Supplement is, and each other Series 2008-1 Transaction Document to which the Issuer is a party, when duly executed and delivered, will be, legal, valid and binding obligations of the Issuer, enforceable against the Issuer in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency or other similar laws of general application affecting the enforcement of creditors’ rights or by general principles of equity limiting the availability of equitable remedies.

Section 605. Material Adverse Change. Since its date of formation, there has been no Material Adverse Change in the financial condition of the Issuer.

Section 606. Place of Business. The Issuer’s only “place of business” (within the meaning of Section 9-307 of the UCC) is located at its address determined in accordance with Section 1307 of the Indenture.

Section 607. No Agreement or Contracts. The Issuer is not now and has not been a party to any contract or agreement (whether written or oral) other than the Series 2008-1 Transaction Documents and the Transaction Documents (as defined in the Indenture).

 

 

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Section 608. Consents and Approvals. No approval, authorization or consent of any trustee or holder of any Indebtedness or obligation of the Issuer or of any other Person under any agreement, contract, lease or license or similar document or instrument to which the Issuer is a party or by which Issuer is bound, is required to be obtained by the Issuer in order to make or consummate the transactions contemplated under the Series 2008-1 Transaction Documents, except for those approvals, authorizations and consents that have been obtained on or prior to the Closing Date or which the failure to obtain would not reasonably be expected to result in a Material Adverse Change. All consents and approvals of, filings and registrations with, and other actions in respect of, all Governmental Authorities required to be obtained by Issuer in order to make or consummate the transactions contemplated under the Series 2008-1 Transaction Documents have been, or prior to the time when required will have been, obtained, given, filed or taken and are or will be in full force and effect other than any such consents, approvals, filings or registrations the failure to so obtain or make would not reasonably be expected to result in a Material Adverse Change.

Section 609. Margin Regulations. The Issuer does not own any “margin security”, as that term is defined in Regulation U of the Federal Reserve Board, and the proceeds of the Series 2008-1 Notes issued hereunder will be used only for the purposes contemplated hereunder. None of such proceeds will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security, for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the Series 2008-1 Advances under this Supplement to be considered a “purpose credit” within the meaning of Regulations T, U and X. The Issuer will not take or permit any agent acting on its behalf to take any action which might cause the Indenture or this Supplement or any document or instrument delivered by the Issuer pursuant hereto to violate any regulation of the Federal Reserve Board.

Section 610. Taxes. All federal, state, local and foreign tax returns, reports and statements required to be filed by the Issuer have been filed with the appropriate Governmental Authorities, and all Taxes, Other Taxes and other impositions shown thereon to be due and payable by the Issuer have been paid prior to the date on which any fine, penalty, interest or late charge may be added thereto for nonpayment thereof, or any such fine, penalty, interest, late charge or loss has been paid, or the Issuer is contesting its liability therefor in good faith and has fully reserved all such amounts according to GAAP in the financial statements provided pursuant to Section 626 of the Indenture. The Issuer has paid when due and payable all charges upon the books of the Issuer and no Government Authority has asserted any Lien against the Issuer with respect to unpaid Taxes or Other Taxes. Proper and accurate amounts have been withheld by the Issuer from its employees for all periods in full and complete compliance with the tax, social security and unemployment withholding provisions of applicable federal, state, local and foreign law and such withholdings have been timely paid to the respective Governmental Authorities.

Section 611. Other Regulations. The Issuer is not: (a) a “public utility company” or a “holding company,” or an “affiliate” or a “Subsidiary company” of a “holding company,” or an “affiliate” of such a “Subsidiary company,” as such terms are defined in the Public Utility Holding Company Act of 1935, as amended, or (b) an “investment company,” or an “affiliated person” of, or a “promoter” or “principal underwriter” for, an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended. The

 

 

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issuance of the Series 2008-1 Notes hereunder and the application of the proceeds and repayment thereof by the Issuer and the performance of the transactions contemplated by this Supplement and the other Series 2008-1 Transaction Documents will not violate any provision of the Investment Company Act or the Public Utility Holding Company Act, or any rule, regulation or order issued by the Securities and Exchange Commission thereunder.

Section 612. Solvency and Separateness.

(a) The capital of the Issuer is adequate for the business and undertakings of the Issuer.

(b) Other than with respect to the transactions contemplated by the Transaction Documents, the Issuer is not engaged in any business transactions with the Manager except as permitted by the Management Agreement or with the Seller except as permitted by the Contribution and Sale Agreement.

(c) At all times, at least one (1) member of the board of directors of the Issuer shall qualify as an Independent Manager (as defined in the Issuer’s limited liability company agreement).

(d) The Issuer’s funds and assets are not, and will not be, commingled with those of the Manager, except as permitted by the Management Agreement.

(e) The Issuer shall maintain (A) correct and complete books and records of account, and (B) minutes of the meetings and other proceedings of its board of managers.

(f) The Issuer is not insolvent under the Insolvency Law and will not be rendered insolvent by the transactions contemplated by the Series 2008-1 Transaction Documents and after giving effect to such transactions, the Issuer will not be left with an unreasonably small amount of capital with which to engage in its business nor will the Issuer have intended to incur, or believe that it has incurred, debts beyond its ability to pay such debts as they mature. The Issuer does not contemplate the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, trustee or similar official in respect of the Issuer or any of its assets.

Section 613. Survival of Representations and Warranties. So long as any of the Series 2008-1 Notes shall be Outstanding and until payment and performance in full of the Outstanding Obligations, the representations and warranties contained herein shall have a continuing effect as having been true when made.

Section 614. No Default. No Event of Default or Early Amortization Event has occurred and is continuing. No event or condition that with notice or the passage of time (or both) could reasonably be expected to constitute an Event of Default or Early Amortization Event has occurred or is continuing.

 

 

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Section 615. Litigation and Contingent Liabilities. No claims, litigation, arbitration proceedings or governmental proceedings by any Governmental Authority are pending or threatened against or are affecting Issuer the results of which will materially and adversely interfere with the consummation of any of the transactions contemplated by the Indenture, this Supplement or any document issued or delivered in connection therewith or herewith.

Section 616. Title; Liens. The Issuer has good, legal and marketable title to each of its respective assets, and none of such assets is subject to any Lien, except for Permitted Encumbrances and the Liens created or permitted pursuant to the Indenture.

Section 617. Subsidiaries. The Issuer has no subsidiaries.

Section 618. No Partnership. Issuer is not a partner or joint venturer in any partnership or joint venture.

Section 619. Pension and Welfare Plans. During the twelve-consecutive-month period prior to the date of the execution and delivery of this Supplement, no steps have been taken to terminate any Plan, and no contribution failure has occurred with respect to any Plan, sufficient to give rise to a lien under section 302(f) of ERISA. No condition exists or event or transaction, has occurred with respect to any Plan which could result in the Issuer or any ERISA Affiliate of the Issuer incurring any material liability, fine or penalty. As of the Closing Date, the Issuer is not a Benefit Plan Investor.

Section 620. Ownership of the Issuer. All of the issued and outstanding membership interests of the Issuer are owned by TAL.

Section 621. Security Interest Representations.

(a) The Indenture creates a valid and continuing security interest (as defined in the UCC) in the Collateral in favor of the Indenture Trustee, for the benefit of the Noteholders and any Hedge Counterparty, which security interest is prior to all other Liens, and is enforceable as such as against creditors of and purchasers from the Issuer.

(b) The Containers constitute “goods” within the meaning of the applicable UCC. The Leases constitute “tangible chattel paper” within the meaning of the UCC. The lease receivables constitute “accounts” or “proceeds” of the Leases with the meaning of the UCC. The Trust Account, the Restricted Cash Account (if such account has been opened) and the Series 2008-1 Series Account constitute “securities accounts” within the meaning of the UCC. The Issuer’s contractual rights under any Hedge Agreements, the Contribution and Sale Agreement and the Management Agreement constitute “general intangibles” within the meaning of the UCC.

(c) The Issuer owns and has good and marketable title to the Collateral, free and clear of any Lien (whether senior, junior or pari passu), claim or encumbrance of any Person, except for Permitted Encumbrances.

 

 

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(d) The Issuer has caused the filing of all appropriate financing statements or documents of similar import in the proper filing office in the appropriate jurisdictions under Applicable Law in order to perfect the security interest in the Collateral granted to the Indenture Trustee in the Indenture.

(e) Other than the security interest granted to the Indenture Trustee pursuant to the Indenture, the Issuer has not pledged, assigned, sold, granted a security interest in, or otherwise conveyed any of the Collateral, except as permitted pursuant to the Indenture. The Issuer has not authorized the filing of, and is not aware of, any financing statements against the Issuer that include a description of collateral covering the Collateral other than any financing statement or document of similar import (i) relating to the security interest granted to the Indenture Trustee in the Indenture or (ii) that has been terminated. The Issuer has no actual knowledge of any judgment or tax lien filings against the Issuer.

(f) Pursuant to Section 3.3.5 of the Management Agreement, the Manager has acknowledged that it is holding the Leases, to the extent they relate to the Managed Containers on behalf of, and for the benefit of, the Indenture Trustee. None of the Leases that constitute or evidence the Collateral has any marks or notations indicating that they have been pledged, assigned or otherwise conveyed to any Person. The Seller has caused the filing of all appropriate financing statements or documents of similar import in the proper filing office in the appropriate jurisdictions under Applicable Law in order to perfect the ownership interest of the Issuer (and the Indenture Trustee as its assignee) in the Leases (to the extent that such Leases relate to the Managed Containers) arising under the Contribution and Sale Agreement.

(g) The Issuer has received all necessary consents and approvals required by the terms of the Collateral to the pledge to the Indenture Trustee of its interest and rights in such Collateral hereunder or under the Indenture.

(h) U.S. Bank National Association (in its capacity as securities intermediary) has identified in its records the Indenture Trustee as the Person having a Security Entitlement in each of the Trust Account and the Series 2008-1 Series Account (and will do so with respect to the Restricted Cash Account, if and when such account is opened).

(i) The Trust Account and the Series 2008-1 Series Account are not in the name of any Person other than the Issuer. The Issuer has not consented for U.S. Bank National Association (as the securities intermediary of the Trust Account and the Series 2008-1 Series Account) to comply with Entitlement Orders of any Person other than the Indenture Trustee.

(j) No creditor of the Issuer (other than (x) with respect to the Managed Containers, the related lessee and (y) the Manager in its capacity as Manager under the Management Agreement) has in its possession any goods that constitute or evidence the Collateral, other than for purposes of repair, refurbishment, painting, positioning, storage and other similar matters with respect to Managed Containers.

The representations and warranties set forth in this Section 621 shall survive until this Supplement is terminated in accordance with its terms and the terms of the Indenture. Any breaches of the representations and warranties set forth in this Section 621 may be waived by the Indenture Trustee, only with the prior written consent of the Control Party.

 

 

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Section 622. Tax Election of the Issuer. None of the Issuer, any of its members or any other Person has elected, or agreed to elect, to treat the Issuer as an association taxable as a corporation for United States federal income tax purposes.

ARTICLE VII

The Guaranty

Section 701. The Guaranty. (a) On each Determination Date, the Indenture Trustee shall determine, with respect to the immediately following Payment Date, based solely on the information contained in the Manager Report, whether there exists a Deficiency Amount.

(b) If there exists a Deficiency Amount with respect to a Payment Date, the Indenture Trustee shall complete a Notice in the form of Exhibit A to the Guaranty and submit such claim for such Deficiency Amount to the Guarantor in accordance with the terms of the Guaranty. Any payment made by the Guarantor under the Guaranty shall be applied solely to the payment of principal of or interest on the Series 2008-1 Notes subject to the terms of the Guaranty.

(c) The Indenture Trustee shall (i) receive Deficiency Amounts as attorney-in-fact of each of the Series 2008-1 Noteholders and (ii) disburse such Deficiency Amounts directly to the Series 2008-1 Noteholders.

(d) The Indenture Trustee shall keep a complete and accurate record of the amount and allocation of Deficiency Amounts and the Guarantor shall have the right to inspect such records at reasonable times upon three (3) Business Days’ prior written notice to the Indenture Trustee.

(e) The Indenture Trustee shall be entitled to enforce on behalf of the Series 2008-1 Noteholders the obligations of the Guarantor under the Guaranty.

(f) Nothing in this Section 701 or in any other Section hereof shall or is intended to modify any of the terms, provisions or conditions of the Guaranty.

ARTICLE VIII

Miscellaneous Provisions

Section 801. Ratification of Indenture. As supplemented by this Supplement, the Indenture is in all respects ratified and confirmed and the Indenture as so supplemented by this Supplement shall be read, taken and construed as one and the same instrument.

 

 

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Section 802. Counterparts. This Supplement may be executed in two or more counterparts, and by different parties on separate counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument. Delivery of an executed counterpart of this Supplement by facsimile or by electronic means shall be equally effective as of the delivery of an originally executed counterpart.

Section 803. Governing Law. THIS SUPPLEMENT SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW BUT OTHERWISE WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW, AND THE RIGHTS, OBLIGATIONS AND REMEDIES OF THE PARTIES HERETO SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

Section 804. Amendments and Modifications. (a) The terms of this Supplement may be waived, modified or amended only in a written instrument signed by (A) each of the Issuer, the Control Party and the Indenture Trustee and (B) (i) except with respect to the matters set forth in Section 1002(a) of the Indenture, the prior written consent of the Majority of Holders and (ii) if required pursuant to Section 701(g) hereof or pursuant to Section 1001 or 1002(a) of the Indenture, each affected Series 2008-1 Noteholder. For the purposes of clause (B) of the preceding sentence, any amendment to or modification or waiver of this Supplement shall be deemed a Supplemental Indenture subject to Sections 1001 or 1002 of the Indenture. The Series 2008-1 Note Existing Commitment of an individual Series 2008-1 Noteholder may only be increased, and the Conversion Date of an individual Series 2008-1 Noteholder may only be extended, in accordance with the provisions of Section 8.1(a) of the Note Purchase Agreement.

(b) Promptly after the execution by the Issuer and the Indenture Trustee of any written instrument pursuant to this Section, the Indenture Trustee shall mail to each Rating Agency, if any, then having a rating in effect with respect to the Series 2008-1 Notes, the Noteholders, the Administrative Agent, each Hedge Counterparty and the Guarantor a copy of the text of such Supplement. Any failure of the Indenture Trustee to mail such copy, or any defect therein, shall not, however, in any way impair or affect the validity of any such Supplement.

Section 805. Consent to Jurisdiction. ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST ANY PARTY HERETO ARISING OUT OF OR RELATING TO THIS SUPPLEMENT, OR ANY TRANSACTION CONTEMPLATED HEREBY, MAY BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE COUNTY OF NEW YORK, STATE OF NEW YORK AND EACH PARTY HERETO HEREBY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND, SOLELY FOR THE PURPOSES OF ENFORCING THIS SUPPLEMENT, EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING.

 

 

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Section 806. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, AS AGAINST THE OTHER PARTIES HERETO, ANY RIGHTS IT MAY HAVE TO A JURY TRIAL IN RESPECT OF ANY CIVIL ACTION OR PROCEEDING (WHETHER ARISING IN CONTRACT OR TORT OR OTHERWISE), INCLUDING ANY COUNTERCLAIM, ARISING UNDER OR RELATING TO THIS SUPPLEMENT OR ANY OTHER TRANSACTION DOCUMENT, INCLUDING IN RESPECT OF THE NEGOTIATION, ADMINISTRATION OR ENFORCEMENT HEREOF OR THEREOF.

Section 807. Third Party Beneficiary. The Guarantor is a third party beneficiary of this Supplement and shall be entitled to rely on all representations, warranties, covenants and agreements contained herein, and in the Indenture to the extent related hereto, as if made directly to it and as if it were a party hereto and shall have full power and authority to enforce the obligations of the parties hereunder.

[Signature page follows.]

 

 

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IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused this Supplement to be duly executed and delivered as of the day and year first above written.

 

 

 

TAL ADVANTAGE II LLC,

 

 

 

 

 

 

By: 

TAL International Container Corporation,
its manager

 

 

 

 

 

 

 

 

 

 

By: 

 

 

 

Name:

 

 

 

Title:

 

 

 



 

 

 

U.S. BANK NATIONAL ASSOCIATION,
not individually but solely as Indenture Trustee

 

 

 

 

 

 

 

 

By: 

 

 

 

Name:

 

 

 

Title:

 

 

 

 


EX-10.54 4 file4.htm MANAGEMENT AGREEMENT DATED AS OF MARCH 27, 2008

MANAGEMENT AGREEMENT

 

between

TAL INTERNATIONAL CONTAINER CORPORATION

Manager

and

TAL ADVANTAGE II LLC

Owner

 

Dated as of

March 27, 2008

 

 



Table of Contents

 

 

 

 

 

Page

Section 1.

 

Definitions

 

1

         

Section 2.

 

Appointment of the Manager

 

1

 

 

2.1

 

Appointment of Manager

 

1

 

 

2.2

 

Appointment of Subservicers

 

2

 

 

2.3

 

Retention of Title

 

2

 

 

2.4

 

Exclusive Representation of Owner

 

2

         

Section 3.

 

Manager’s Services with Respect to the Managed Containers

 

2

 

 

3.1

 

Non-Discrimination

 

2

 

 

3.2

 

Terms of Lease Agreements

 

3

 

 

3.3

 

Leasing

 

3

 

 

3.4

 

Maintenance and Repair

 

4

 

 

3.5

 

Compliance With Law

 

4

 

 

3.6

 

Markings

 

4

 

 

3.7

 

Casualty Losses; Sale of Managed Containers; Lost or Destroyed Containers

 

5

 

 

3.8

 

Sales of Managed Containers

 

5

 

 

3.9

 

Insurance

 

5

 

 

3.10

 

Books and Records; Inspection of Books and Records; Inspection of Managed Containers; Back-up Tape

 

6

 

 

3.11

 

Concentration Account and Payment Instructions

 

7

 

 

3.12

 

Identification of Funds in the Concentration Account

 

7

 

 

3.13

 

Transfer of Funds Received by the Manager

 

8

 

 

3.14

 

Time and Attention to Duties

 

8

         

Section 4.

 

Reporting Obligations of the Manager

 

8

 

 

4.1

 

Reports Due from the Manager

 

8

 

 

4.2

 

Manager Advances

 

10

         

Section 5.

 

Deposits to Trust Account; Payment of Management Fee

 

10

 

 

5.1

 

Deposits

 

10

 

 

5.2

 

Compensation of Manager

 

11

         

Section 6.

 

Term

 

12

         

Section 7.

 

Reserved

 

12

         

Section 8.

 

Representations and Warranties; Covenants

 

12

 

 

8.1

 

Manager Representations

 

12

 

 

8.2

 

Owner Representations

 

14

 

 

8.3

 

Covenants of the Manager

 

15

 

 

-i-

 



Table of Contents

(continued)

 

       

Page

Section 9.

 

Manager Default

 

16

 

 

9.1

 

Manager Default

 

16

 

 

9.2

 

Remedies

 

18

 

 

9.3

 

Transfer of Managed Containers

 

19

 

 

9.4

 

Power of Attorney

 

19

 

 

9.5

 

Owner Power of Attorney

 

20

         

Section 10.

 

No Partnership

 

21

         

Section 11.

 

No Warranties

 

21

         

Section 12.

 

Non-Exclusivity

 

22

         

Section 13.

 

Assignment

 

22

         

Section 14.

 

Indemnification

 

22

 

 

14.1

 

By the Owner

 

22

 

 

14.2

 

By the Manager

 

22

         

Section 15.

 

No Bankruptcy Petition Against the Owner

 

23

         

Section 16.

 

Notices

 

23

         

Section 17.

 

Governing Law; Consent to Jurisdiction

 

25

 

 

17.1

 

Governing Law

 

25

 

 

17.2

 

Consent to Jurisdiction

 

25

 

 

17.3

 

Waiver of Jury Trial

 

25

         

Section 18.

 

Successors and Assigns

 

25

         

Section 19.

 

Severability

 

25

         

Section 20.

 

Entire Agreement; Amendments; Waiver

 

25

         

Section 21.

 

Counterparts

 

26

         

Section 22.

 

Intended Third Party Beneficiaries

 

26

 

 

-ii-

 



Table of Contents

(continued)

 

EXHIBIT A – MANAGER REPORT

 

 

     

EXHIBIT B – AFFILIATES OF MANAGER AND APPROVED SUBSERVICERS

 

 

     

EXHIBIT C – CREDIT AND COLLECTION POLICY

 

 

     

EXHIBIT D – AGREED UPON PROCEDURES

 

 

     

EXHIBIT E – DEPRECIATION POLICY

 

 

 

 

-iii-

 



 

 

This MANAGEMENT AGREEMENT, dated as of March 27, 2008 (as amended, modified or supplemented from time to time in accordance with the terms hereof, this “Agreement”), between TAL ADVANTAGE II LLC, a limited liability company organized and existing under the laws of the State of Delaware (together with its successors and permitted assigns, the “Owner” or the “Issuer”) and TAL INTERNATIONAL CONTAINER CORPORATION, a Delaware corporation (together with its successors and permitted assigns, “Manager”).

W I T N E S S E T H

WHEREAS, the Owner is the owner of the Managed Containers; and

WHEREAS, the Manager is in the business of leasing Containers to shipping lines and other container users, and is experienced in administration of a container leasing business; and

WHEREAS, the Owner wishes to contract with the Manager for the purposes of (i) managing the operation and leasing of the Managed Containers and (ii) performing other administrative duties for the Owner; and

WHEREAS, the Manager has agreed to manage the Owner’s business including the Managed Containers and to operate and lease out the Managed Containers as part of the Manager’s Container Fleet and to perform other administrative duties for the Owner; and

NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants and agreements contained herein, the parties hereto hereby agree as follows:

Section 1. Definitions. Terms capitalized but not defined herein shall have the meanings ascribed thereto in Appendix A to that certain Indenture dated as of March 27, 2008, between the Issuer and U.S. Bank National Association, as Indenture Trustee (as amended, restated or otherwise modified from time to time in accordance with the terms thereof, the “Indenture”), as such Appendix A may be amended, supplemented or otherwise modified from time to time in accordance with the provisions of the Indenture.

Section 2. Appointment of the Manager.

2.1 Appointment of Manager. The Owner hereby exclusively (i) appoints the Manager as its agent to manage and administer its business, and to manage the Managed Containers, including performance of all of the Owner’s duties and observance of all of the Owner’s obligations under the Indenture and the other Transaction Documents to which it is a party, and (ii) grants to the Manager the authority on behalf of the Owner to enter into, administer, enforce and terminate Lease Agreements relating to the Managed Containers, to sell, transfer or otherwise dispose of and enforce the Owner’s rights with respect to the Managed Containers, to collect monies and make disbursements on behalf of the Owner, and to manage its finances, all such activities described in clauses (i) and (ii) to be conducted on the terms and subject to the conditions set forth herein. The Manager hereby agrees to so manage the Managed Containers and administer the Owner’s business, including performance of all of the Owner’s duties and observance of all of the Owner’s obligations under the Indenture and the other

 

 

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Transaction Documents to which the Owner is a party, upon the terms and conditions herein; provided, however, that nothing contained in this Agreement or any other Transaction Document shall be or shall be construed to be either (x) an express or implied guaranty by the Manager of the Notes or any other Outstanding Obligations incurred by the Owner or (y) an express or implied agreement to make payments on the Notes or other Outstanding Obligations.

2.2 Appointment of Subservicers. In performing its duties hereunder, the Manager may, subject to the restrictions set forth herein, contract with any of its Affiliates listed on Exhibit B hereto to provide the services required to be rendered by the Manager hereunder (each resulting agreement, a “Subservicing Agreement,” and each Affiliate that is a party to such Subservicing Agreement, a “Subservicer”); provided, however, that (i) the Manager shall be solely responsible for the receipt and processing of all Container Revenues, Sales Proceeds and Casualty Proceeds, (ii) each Subservicing Agreement (but not other agreements to which the Manager may be a party) must expressly provide that such Subservicing Agreement may be terminated by the Requisite Global Majority if a Manager Default has occurred and is then continuing, and (iii) the Manager shall be solely responsible for the payment to each such Subservicer of any and all compensation, expenses and indemnities to each such Subservicer. The Manager will require each Subservicer to forward weekly into a bank account in the name of the Manager all Collections received by such Subservicer. The Manager will not contract with any other Person to provide any of the services to be rendered by the Manager to the Owner hereunder without the prior written consent of the Requisite Global Majority. Notwithstanding any provision of such services by its Subservicers, the Manager shall remain obligated and liable to the Owner, the Indenture Trustee, each Series Enhancer (so long as such Series Enhancer is the Control Party for a Series of Outstanding Notes) and the Noteholders for the management and the administration of the Managed Containers in accordance with the provisions of this Agreement, without diminution of such obligation or liability by virtue of such agreements or arrangements with its Subservicers, to the same extent and under the same terms and conditions as if the Manager alone were servicing and administering the Managed Containers.

2.3 Retention of Title. The Owner shall at all times retain full legal and equitable title to the Managed Containers, notwithstanding the management thereof by Manager hereunder. Manager shall not make reference to, or otherwise deal with or treat, the Managed Containers in any manner except in conformity with this Agreement.

2.4 Exclusive Representation of Owner. Except as otherwise provided in this Agreement, during the term of this Agreement, the Manager will be the exclusive agent of the Owner with respect to the Owner’s business and with respect to the management of the Managed Containers and the Owner agrees that it will not engage any other Person to perform, or pay any consideration to any other Person for performing, the same or similar services with respect to the owner’s business or with respect to the Managed Containers.

Section 3. Manager’s Services with Respect to the Managed Containers.

3.1 Non-Discrimination. In performing its duties pursuant to this Agreement, the Manager shall exercise substantially the same degree of skill and care with which it services, leases and manages containers held for its own account and consistent with the reasonable commercial practices of a prudent container lessor engaged in the administration, leasing and

 

 

2

 



servicing of shipping containers (such standard of care, the “Servicing Standard”). Without limiting the foregoing, the Manager shall not knowingly discriminate in favor of or against the Managed Containers in connection with the management and operation of the Container Fleet.

3.2 Terms of Lease Agreements. Without prejudice to the rights and title of the Owner with respect to the Managed Containers, the Manager may arrange for the leasing of the Managed Containers pursuant to Lease Agreements that are in its own name as principal, and not as agent of the Owner; provided, however, that it is understood and agreed that the Manager is acting thereunder solely as agent of the Owner. The Manager shall have sole discretion to determine to whom to lease, sell or otherwise dispose of the Managed Containers, to determine the per diem rates and other charges to be paid and all other terms and conditions of the Lease Agreements and to renegotiate, amend and consent to waivers under such Lease Agreements. The Manager shall invoice and collect from lessees all rental payments and other amounts due under and pursuant to the Lease Agreements relating to the Managed Containers.

3.3 Leasing. The Manager shall operate and lease the Managed Containers as part of its Container Fleet and shall perform all managerial and administrative functions and provide or arrange for the provision of all services and documentation of any nature which it considers necessary or desirable for such operation and leasing. The Manager shall, in compliance with the Servicing Standard, take all actions the Manager deems appropriate to ensure compliance by the Lessees with the terms of any Lease Agreement, including the exercise of the rights of the lessor thereunder.

3.3.1 With respect to the Managed Containers, the Manager shall use reasonable efforts to include in the terms of lease agreements with lessees a provision requiring lessees to comply with Applicable Law affecting the Managed Containers and their use, operation and storage while the Managed Containers are on-hire and the Manager shall use reasonable efforts to include in the terms of depot agreements with third-party storage and repair depots a provision requiring the depots to comply with Applicable Law affecting the Managed Containers while the Managed Containers are off-hire and stored in the depot.

3.3.2 The Manager will monitor and record the status of the Managed Containers in the same manner as for containers held for its own account, i.e. for each Managed Container it will record the on-hire location, the date of on-hire and the lessee to whom the Managed Container is on-hire, the off-hire date of the Managed Container and the off-hire location, and the depot where the Managed Container is located while off-hire.

3.3.3 The Manager shall follow the Credit and Collection Policy with respect to the leasing of the Managed Containers and, subject to the terms of such Credit and Collection Policy, the Manager may, in its sole discretion (a) determine and approve the creditworthiness of any lessee (though the Manager makes no representation or warranty to the Owner as to the solvency or financial stability of any lessee), (b) determine that any amount due from any lessee is not collectible, (c) institute and prosecute legal proceedings against a lessee as permitted by Applicable Law, (d) terminate or cancel any Lease Agreement, (e) recover possession of the Managed Containers from any lessee, (f) settle, compromise or release any proceeding or claim against a lessee in the name of the Manager or, if appropriate, in the name of the Owner, or (g) reinstate any Lease Agreement.

 

 

3

 



3.3.4 In performing its duties under this Agreement, the Manager shall use reasonable efforts to comply with the Concentration Limits when entering into new Lease Agreements and, in any event, shall not, without the prior written consent of the Requisite Global Majority, lease all, or substantially all, of the Managed Containers to an Affiliate of the Manager or to a single lessee.

3.3.5 The Manager hereby acknowledges that the Manager and its Affiliates are holding the leases relating to the Managed Containers (but only to the extent that such leases relate to the Managed Containers), on behalf of, and for the benefit of, the Indenture Trustee.

3.4 Maintenance and Repair. The Manager shall keep, or, with respect to Managed Containers on lease, cause the related lessee, to keep, each Managed Container (i) in good repair and working order in a manner consistent with past practices, and (ii) in accordance with its maintenance and repair standards for the Container Fleet. The Manager shall make, or cause to be made, all necessary inspections, repairs, replacements, additions and improvements to each Managed Container as are commercially reasonable for the conduct of its business in accordance with the ordinary course of the Manager’s business consistent with past practices; it being understood that it may, in some cases, be commercially reasonable not to repair a Managed Container. The Manager shall institute and prosecute claims against the manufacturers and sellers of the Managed Containers as the Manager may consider advisable for breach of warranty, any defect in condition, design, operation or fitness or any other nonconformity with the terms of manufacture. The Manager shall have no liability to the Owner for any such breach of any manufacturer’s or seller’s or any other Person’s warranty or for any such defect in condition, design, operation or fitness or any other nonconformity with the terms of manufacture. The Manager shall at all times use the Managed Containers, and require the related lessee to use the Managed Containers, in accordance with good operating practices. The Manager shall not knowingly use (or knowingly permit the lessees to use) the Containers for storage or transportation of contraband in violation of applicable United States law.

3.5 Compliance With Law. The Manager will comply, in all material respects, with all acts, rules, regulations, orders, decrees and directions of any governmental authority that are applicable to the Lease Agreements and the Managed Containers or any part thereof except for any noncompliance which would not reasonably be expected to result in a Material Adverse Change; provided, however, that the Manager may contest any act, rule, regulation, order, decree or direction in any reasonable manner which shall not materially and adversely affect the Noteholders or any Series Enhancer; and provided, further, that such contests shall be in good faith by appropriate proceedings and as to which adequate reserves in accordance with GAAP have been established, but only so long as such proceedings shall not, individually or in the aggregate, subject any Series Enhancer, any Noteholder or Indenture Trustee to any civil or criminal liability.

3.6 Markings. The Manager shall ensure that each Managed Container shall carry its Container Identification Number and other markings as may be required for its operation in marine and intermodal shipping.

 

 

4

 



3.7 Casualty Losses; Sale of Managed Containers; Lost or Destroyed Containers. If any Managed Container shall suffer a Casualty Loss while it is subject to the terms of this Agreement, the Manager shall remit to the Trust Account, in accordance with the provisions of Section 5.1.1 hereof, the Casualty Proceeds (net of any expenses, taxes or reserves in respect thereof), if any, received as a consequence of such Casualty Loss.

3.8 Sales of Managed Containers. The Manager shall have the ability in its sole discretion to sell or otherwise dispose of any of the Managed Containers, subject to compliance with the applicable provisions of Sections 404 and 606 of the Indenture. The Manager shall remit to the Trust Account, in accordance with the provisions of Section 5.1.1 hereof, the Sales Proceeds (net of any expenses, taxes or reserves in respect thereof) received as a consequence of any such sale.

3.9 Insurance. (a) The Manager will, in a manner consistent with its normal procedures and the Servicing Standard, (i) effect and maintain with financially sound and reputable companies general liability insurance, insuring the Issuer and the Indenture Trustee (for the benefit of the Noteholders) against liability for personal injury and property damage liability, caused by, or relating to, the Managed Containers then off-lease, with such levels of coverage and deductibles that are consistent with the levels in effect as of the Closing Date, and (ii) have a standard form of lease agreement that requires each lessee to maintain (1) physical damage insurance in an amount not less than the stipulated loss value agreed to by the lessee of the Managed Containers on lease to it, and (2) comprehensive general liability insurance, including contractual liability, against claims for bodily injury or death and property damage. The Indenture Trustee reserves the right (but shall not have the obligation) to obtain, at the direction of the Requisite Global Majority and at the Manager’s expense, insurance of the type described in clause (i) above if the Manager shall fail to obtain such coverage in the specified amounts. However, the Indenture Trustee will notify the Manager prior to obtaining such insurance.

(b) All insurance maintained by the Manager for loss or damage of the Managed Containers shall provide that losses, if any, shall be payable to the Issuer and the Indenture Trustee or its designee as an additional loss payee and the Manager shall utilize its reasonable efforts to have all checks relating to any such losses delivered promptly to the Indenture Trustee. The Issuer and the Indenture Trustee shall be named as additional insureds with respect to all such liability insurance maintained by the Manager (or on behalf of the Manager by a direct or indirect parent company thereof). The Manager shall pay the premiums with respect to all such insurance and deliver to Indenture Trustee evidence of such insurance coverage as contemplated by Section 4.1.4. The Manager shall cause to be provided to the Indenture Trustee, not less than fifteen (15) days prior to the scheduled expiration or lapse of such insurance coverage, evidence reasonably satisfactory to the Indenture Trustee of renewal or replacement coverage. The Manager shall use its commercially reasonable efforts to have each insurer agree, by endorsement upon the policy or policies issued by it or by independent instrument furnished to the Indenture Trustee, that (i) it will give each additional insured and the loss payee thirty (30) days’ prior written notice of the effective date of any material alteration, cancellation or non-renewal of such policy and (ii) in the event that the cancellation of such coverage would result in a breach of this Section 3.9 by the Manager, it will permit the Issuer and/or the Indenture Trustee to make payments to effect the continuation of coverage upon notice of cancellation due to nonpayment of premium. Such insurance may be effected by a policy which covers the entire Container Fleet, which policy shall include an additional insured and loss payee endorsement with respect to the Managed Containers in favor of the Indenture Trustee, for the benefit of the Noteholders.

 

 

5

 



3.10 Books and Records; Inspection of Books and Records; Inspection of Managed Containers; Back-up Tape.

3.10.1 The Manager shall maintain at its offices (which, as of the Closing Date, are located at 100 Manhattanville Road, Purchase, New York 10577-2135 USA), such books and records (including computer records) with respect to the Managed Containers as it maintains for the Container Fleet and the leasing thereof, including a computer database including the Managed Containers (containing sufficient information to generate the List of Containers and the reports required to be delivered pursuant to this Agreement), any Lease Agreements relating thereto, their lessees (if on-hire) or location (if off-hire) and their Net Book Value.

3.10.2 The Manager shall make available to the Owner, the Indenture Trustee, the Administrative Agent and each Series Enhancer, for inspection and copying, its books, records and reports relating to the Managed Containers and copies of all Lease Agreements or other documents relating thereto, all in the format which the Manager uses for its own operations. The Person(s) desiring to conduct any such inspection of the books, records and reports shall provide the Manager with not less than (i) five (5) Business Days’ notice if a Manager Default is not then continuing or (ii) one (1) Business Day’s notice if a Manager Default shall have occurred and is then continuing, and shall specify in such notice the matters to be addressed in such inspection; provided, however, that, unless an Event of Default or Manager Default shall have occurred and is then continuing, the Indenture Trustee shall not be permitted to deliver any such notice or to seek the right to any such inspection pursuant to this Section 3.10.2, and the Manager shall not be obligated to permit any such inspection pursuant to this Section 3.10.2, in the event that the Indenture Trustee shall have consummated two inspections pursuant to this Section 3.10.2 at any time in the previous 12-month period. All such inspections shall be conducted during normal business hours and shall not unreasonably disrupt the Manager’s business, and, subject to the foregoing, the Owner, Indenture Trustee, the Administrative Agent or Series Enhancer, as applicable will be permitted to discuss, with any Authorized Officer, Managing Officer or the Manager’s independent accountants, the affairs, finances and accounts of the Manager as they relate to the Managed Containers and this Agreement. All inspections conducted by the Indenture Trustee shall be conducted by an independent diligence service selected by the Administrative Agent (provided, however, that if no Manager Default, Early Amortization Event or Event of Default is continuing, the second annual inspection permitted pursuant to this Section 3.10.2 shall not involve a collateral or field audit). So long as no Manager Default, Early Amortization Event or Event of Default is continuing, the Manager shall pay the reasonable and documented costs and expenses incurred by such Person(s) in conducting not more than one such inspection in any calendar year. In addition, the Manager shall pay the reasonable and documented costs and expenses incurred by such Person(s) in conducting any such examinations during the continuation of any of a Manager Default, Early Amortization Event or Event of Default.

 

 

6

 



The Owner acknowledges that the Manager uses certain software under license from unrelated third parties and that the Manager shall grant the Owner, the Indenture Trustee, the Administrative Agent and each Series Enhancer access to the computer systems and data contained therein, but not copies of the software itself.

3.10.3 The Manager shall, in accordance with its then existing disaster recovery plan, deliver periodically (but no less frequently than weekly) to an independent data custodian (the “Data Custodian”) reasonably satisfactory to the Administrative Agent and each Series Enhancer an electronic copy (the “Tape”) of the following information, as of the most recently available date, with respect to each of the Managed Containers: (i) the Container Identification Number, (ii) if then on-lease, the name of the lessee and the date of the related Lease Agreement, and (iii) if then off-lease, the name and location of the depot in which stored. The Manager shall cause such Data Custodian to make the most recent Tape available to the Owner, the Indenture Trustee, the Administrative Agent and any Series Enhancer for inspection upon reasonable notice to such Data Custodian and subject to the Data Custodian’s customary security requirements; provided, however, that, so long as no Manager Default, Early Amortization Event or Event of Default is continuing, not more than one such inspection shall be made in any calendar year. During the continuation of any of a Manager Default, Early Amortization Event or Event of Default, the Manager shall pay the reasonable and documented costs and expenses incurred by such Person(s) in conducting all inspections made in accordance with the provisions of this Section 3.10.3. Upon the termination of this Agreement pursuant to Section 9.2, the Manager shall deliver to each of the Administrative Agent and the Indenture Trustee a copy of the Tape containing information with respect to the Managed Containers as of such date.

3.10.4 Liens. The Manager agrees not to create, incur, assume or grant, or suffer to exist, directly or indirectly, any lien, security interest, pledge or hypothecation of any kind on or concerning the Managed Containers, the related Lease (to the extent related to a Managed Container), title thereto or any interest therein or in this Agreement to any Person other than the Owner, except for Permitted Encumbrances. The Manager will promptly take or cause to be taken such actions as may be necessary to discharge any such lien that arises by, through or under the actions of the Manager in violation of this Section 3.10.4.

3.11 Concentration Account and Payment Instructions. The Manager shall maintain the Concentration Account. The Manager shall instruct all lessees to submit all payments on the Leases directly to the Concentration Account (or to a post office box or a lockbox from which the applicable payment items will be removed and deposited in the Concentration Account). The Manager shall not grant any lien or encumbrance in the Concentration Account to any Person other than the Lien created pursuant to the Intercreditor Agreement.

3.12 Identification of Funds in the Concentration Account. Weekly (or more frequently at the Manager’s option) beginning with the first full calendar week following the Closing Date, the Manager shall identify all Container Revenues, Sales Proceeds or Casualty Proceeds received in the Concentration Account during the preceding week as relating to either a Managed Container or another container managed by the Manager. Any such Container Revenues, Sales Proceeds or Casualty Proceeds that have been identified as relating to a Managed Container shall be transferred by the Manager to the Trust Account in accordance with the procedures outlined in Section 5.1 hereof. Prior to such transfer to the Trust Account, all Container Revenues, Sales Proceeds and Casualty Proceeds relating to a Managed Container received, or held by, the Manager shall be deemed to be held by the Manager in trust for the benefit of Indenture Trustee.

 

 

7

 



3.13 Transfer of Funds Received by the Manager. If, notwithstanding the payment instructions given by the Manager to a lessee in the monthly invoice, lease payments or other amounts in respect of the Managed Containers are received directly by the Manager, the Manager agrees to hold any such lease payments or other amounts in trust and, within two (2) Business Days after receipt, transmit and deliver to the Concentration Account (or a related post office box or lockbox), in the form received, all cash, checks and other instruments or writings for the payment of money so received by the Manager.

3.14 Time and Attention to Duties. The Manager shall devote such time and attention to the performance of its duties hereunder as is reasonably necessary, it being understood that the Manager shall not be required to devote all of its time or attention to the performance of such duties, it being further understood that the Manager manages, and may in the future manage, containers other than the Managed Containers, either for third parties or for its own account, and may, as well, conduct business unrelated to managing containers. Nothing in this Agreement shall be construed to prohibit the Manager from performing its obligations to owners of other containers or from engaging in such (or any other) business activity.

Section 4. Reporting Obligations of the Manager.

4.1 Reports Due from the Manager.

4.1.1 Financial Statements. The Manager will maintain the Owner’s financial books and records and prepare the Owner’s financial statements. The Manager will deliver to the Indenture Trustee, the Rating Agencies, the Administrative Agent and each Series Enhancer the financial statements required to be delivered to the Indenture Trustee pursuant to Section 625 of the Indenture. All such financial statements shall be prepared in accordance with GAAP, subject to, in the case of unaudited financial statements, the absence of footnotes, and in the quarterly financial statements, the absence of year-end adjustments.

4.1.2 Manager Reports. On or prior to each Determination Date, the Manager shall deliver to the Owner, the Administrative Agent and the Indenture Trustee a report as to deposits into and instructions for payments out of the Trust Account, substantially in the form of Exhibit A hereto (each such report, the “Manager Report”), which report shall be certified by the chief financial officer, controller, treasurer or other financial officer of the Manager with primary responsibility for matters arising under this Agreement or another authorized signatory acceptable to the Administrative Agent. Each such Manager Report shall also include (a) evidence of the Manager’s compliance with the financial covenants set forth in Sections 9.1.9, 9.1.10 (beginning with the Manager Report delivered on November 2008 Determination Date) and 9.1.11 hereof, which calculations shall be based on the most recently certified quarterly financial information, (b) accounts receivable agings, (c) top-25 lessee concentrations, (d) utilization ratios for both the Managed Containers and the Container Fleet, (e) other information regarding the Container Fleet upon request, and (f) the calculations required to demonstrate compliance by the Issuer with clauses (3), (4), (5) and (6) of Section 1201 of the Indenture.

 

 

8

 



4.1.3 Asset Base Certificates. On or prior to (i) each Determination Date, and (ii) each date on which an advance of funds to the Issuer is to be made in accordance with the terms of a Supplement, the Manager will deliver to the Owner, the Indenture Trustee and the Administrative Agent, an Asset Base Certificate certified by the chief financial officer, controller, treasurer or other financial officer of the Manager with primary responsibility for matters arising under this Agreement or another authorized signatory acceptable to the Administrative Agent as of the end of the month most recently ended.

4.1.4 Evidence of Insurance. The Manager will provide confirmation of the renewal of the insurance required by Section 3.9 hereof annually before the expiration date of such insurance each year, and will forward copies of all certificates evidencing renewal, and all notices of termination or non-renewal of such insurance, to the Indenture Trustee and the Administrative Agent promptly after receipt.

4.1.5 Other Reports. The Manager shall provide, in the format which the Manager uses for its own operations, any reports filed by the Manager with the Securities and Exchange Commission and any other reports and information which are reasonably requested by the Owner, the Indenture Trustee, any Series Enhancer, each Hedge Counterparty, the Administrative Agent or the Rating Agencies provided that such reports and information are reasonably available from the books and records of the Owner and can be generated by the Manager’s then existing data processing system.

4.1.6 Independent Accountant’s Report. The Manager shall, at its sole cost and expense, deliver to the Issuer, Administrative Agent, the Indenture Trustee, and each Series Enhancer a report from a firm of nationally recognized independent certified public accountants, who may also render other services to TAL International Group or any of its affiliates, on or before May 30th of each year (or 150 days after the end of the Manager’s fiscal year, if other than December 31st of each year), beginning on May 30, 2009, with respect to the twelve months ended on the preceding December 31 (or other applicable fiscal year-end date) (or such other period as shall have elapsed from the Closing Date to the date of such statement), a report (the “Accountants’ Report”) addressed to the Board of Directors of TAL International Group, to the effect that such firm of accountants has audited the books and records of TAL International Group, and issued its report thereon in connection with the audit report on the consolidated financial statements of TAL International Group and (1) such audit was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as such firm considered necessary in the circumstances; (2) the firm is independent of TAL International Group within the meaning of the Code of Professional Ethics of the American Institute of Certified Public Accountants; and (3) specifies the results of the application of such agreed upon procedures, as the Administrative Agent shall reasonably agree from time to time, relating to (i) maintenance of the separateness of the Issuer for bankruptcy remoteness purposes and (ii) three selected Manager Reports and Asset Base Certificates delivered during the preceding year, to achieve the objectives specified on Exhibit D hereto.

4.1.7 Direction of Investments. The Manager in its sole discretion and in accordance with its normal business practices shall direct the Indenture Trustee, in accordance with the terms of the Indenture, as to which Eligible Investments it shall invest funds on deposit in the Trust Account, the Restricted Cash Account and each Series Account.

 

 

9

 



4.1.8 Interest Rate Hedge Agreements. When required by Section 628 of the Indenture, the Manager shall arrange for the Owner to enter into Interest Rate Hedge Agreements (which Interest Rate Hedge Agreements must be in form and substance reasonably satisfactory to the Administrative Agent) that comply with the provisions of that Section.

4.2 Manager Advances. The Manager may, at its option, remit to the Trust Account by 1:00 p.m. New York time on the Business Day prior to a Payment Date, any amount of funds (a “Manager Advance”) elected by the Manager. Under no circumstances shall this Section 4.2 be interpreted as obligating the Manager to make any Manager Advance. The Manager shall be reimbursed for Manager Advances on each Payment Date from amounts on deposit in the Trust Account, subject to the priority of payments set forth in Sections 302 and 806 of the Indenture.

Section 5. Deposits to Trust Account; Payment of Management Fee.

5.1 Deposits.

5.1.1 Weekly Deposits to Trust Account. On or before the last Business Day in New York of each calendar week beginning with the first full calendar week following the week of the Closing Date, the Manager shall cause to be transferred from the Concentration Account to the Trust Account an amount equal to the excess (if any) of (x) the sum of (A) the Manager’s good faith estimate of the Container Revenues for the Managed Containers received during the immediately preceding calendar week (excluding any customer advance payments, such advance payments to be included in the distribution for the month earned) and (B) subject to Section 311 of the Indenture, the Manager’s good faith estimate of the Sales Proceeds and Casualty Proceeds received during the immediately preceding calendar week, over (y) the Manager’s good faith estimate of Direct Operating Expenses for the Managed Containers accrued during the immediately preceding calendar week (the excess of (x) over (y), the “Estimated Net Operating Income”). Prior to such transfer or deposit, all Container Revenues, Sales Proceeds and Casualty Proceeds received, or held by, the Manager with respect to the Managed Containers shall be deemed to be held by the Manager in trust for the benefit of the Indenture Trustee.

On or before each Determination Date, the Manager shall determine the excess (if any) of (x) the aggregate amount of Container Revenues, Sales Proceeds and Casualty Proceeds for the Managed Containers actually received during the immediately preceding Collection Period over (y) the aggregate amount of Direct Operating Expenses accrued during such Collection Period and to be paid in the current or a subsequent Collection Period (the excess of (x) over (y), the “Actual Net Operating Income”). If the Actual Net Operating Income for such Collection Period exceeds the Estimated Net Operating Income for such Collection Period, then the Manager will cause to be transferred from the Concentration Account to the Trust Account on such Determination Date funds in an amount equal to such excess. However, if the Estimated Net Operating Income for such Collection Period exceeds the Actual Net Operating Income for such Collection Period, then the Manager shall indicate so on that month’s Manager Report and the amount of such excess (such excess, the “Excess Deposit”) will be distributed to the Manager on the immediately succeeding Payment Date.

 

 

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5.2 Compensation of Manager.

5.2.1 Management Fee. As compensation to the Manager for the performance of its services hereunder, the Owner shall pay the Management Fee to the Manager in arrears on each Payment Date (or, in the case of the first payment of the Management Fee, on the Closing Date). Subject to the terms and conditions of the Indenture, the Management Fee shall be payable to the Manager (to the extent not previously withheld in accordance with the terms hereof) from amounts on deposit in the Trust Account to the extent monies are available for the payment thereof in accordance with the provisions of Section 302(c) of the Indenture; provided, however, that, as long as no Manager Default shall have occurred and been continuing for a period in excess of thirty (30) days, the Manager shall be entitled to withhold in advance, at periodic intervals more frequent than each Payment Date, the pro rata portion of the Management Fee owing to the Manager for such interval from the actual Container Revenues, Sales Proceeds or Casualty Proceeds received by it from lessees or sublessees. For the sake of clarity, to the extent the Manager has withheld amounts from the actual Container Revenues, Sales Proceeds or Casualty Proceeds received by it from lessees or sublessees, then such amounts shall be deducted from the Management Fee owing to the Manager from the Owner hereunder. On each Payment Date, the Manager and the Owner shall determine whether the amounts actually paid to or withheld by the Manager during the preceding calendar month pursuant to the terms of this Section 5.2.1 accord with the Management Fee owing under this Agreement for such month and shall arrange that any excess or deficiency promptly be corrected (i.e., in the case of an overpayment to the Manager, the Manager shall promptly repay such overpayment, and in the case of an underpayment to the Manager such underpayment shall be added to the Management Fee payable to the Manager on such Payment Date). Upon any resignation or termination of the Manager in accordance with the terms of this Agreement and the other Transaction Documents, such resigning or terminated Manager shall not be entitled to receive any Management Fee accruing on or after the effective date of such termination or resignation and such resigning or terminated Manager shall immediately remit to the Trust Account any portion of the Management Fee deducted in advance by such resigning or terminated Manager which did not accrue as of the date following such termination or resignation on which a replacement Manager has assumed the responsibilities of the resigning or terminated Manager.

5.2.2 Business Day. Notwithstanding anything to the contrary contained herein, if any date on which a payment becomes due hereunder is not a Business Day, then such payment may be made on the next succeeding Business Day with the same force and effect as if made on such scheduled date.

5.2.3 No Set-Off, Counterclaim, etc. The Manager’s obligation under this Agreement to transfer to or to deposit any amount to the Trust Account shall (subject to the withholding of the Management Fee as contemplated by Section 5.2.1 hereof) be absolute and unconditional and all payments thereof shall be made free and clear of and without any deduction for or on account of any set-off or counterclaim or any circumstance, recoupment, defense or other right which the Manager may have against the Owner or any other Person for any reason whatsoever (whether in connection with the transactions contemplated hereby or any other transactions), including without limitation, (i) any defect in title, condition, design or fitness for use, of, or any damage to or loss or destruction of, any Managed Container, (ii) any

 

 

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insolvency, bankruptcy, moratorium, reorganization or similar proceeding by or against the Manager or any other Person, or (iii) any other circumstance, happening or event whatsoever, whether or not unforeseen or similar to any of the foregoing.

5.2.4 Manner of Payment. All payments hereunder shall be made in United States Dollars by wire transfer of immediately available funds prior to 2:00 P.M. prevailing Eastern Time, on the date of payment.

Section 6. Term.

6.1.1 Term. The Term of this Agreement shall commence on the date hereof and shall end on the date on which all Outstanding Obligations have been repaid, unless earlier terminated in accordance with the provisions hereof.

6.1.2 Resignation by Manager. The Manager may not resign from its obligations and duties as Manager hereunder, except (i) with the prior written consent of Owner and the Requisite Global Majority or (ii) upon a determination by the Manager that the performance by Manager of its duties under this Agreement is no longer permissible under Applicable Law, which determination shall be evidenced by an Opinion of Counsel, in form and substance reasonably satisfactory to Owner and the Requisite Global Majority, to such effect delivered to the Indenture Trustee, the Administrative Agent and each Series Enhancer. No such resignation shall, to the extent consistent with Applicable Law, become effective until a replacement Manager has assumed the responsibilities of the resigning Manager in accordance with the terms of this Agreement, Section 405 of the Indenture and the other Transaction Documents.

Section 7. Reserved.

Section 8. Representations and Warranties; Covenants.

8.1 Manager Representations. The Manager represents and warrants to the Owner, the Indenture Trustee and each Series Enhancer that:

8.1.1 The Manager is a corporation duly organized and validly existing under the laws of the State of Delaware and is duly qualified and is authorized to do business and is in good standing (or its equivalent) in all jurisdictions where it is required by Applicable Law to be so qualified (or its equivalent) and has all licenses, permits, charters and registrations necessary for the operation of its container management business, except for any such jurisdiction where the failure to be so qualified or for any licenses the failure to hold which, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.

8.1.2 The Manager has the requisite power and authority to enter into and perform its obligations under this Agreement, and all requisite corporate authorizations have been given for it to enter into this Agreement and to perform all the matters envisaged hereby, this Agreement has been duly executed and delivered and constitutes the valid, legally binding and enforceable obligation of the Manager, subject to bankruptcy, insolvency, moratorium, reorganization and other laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

 

 

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8.1.3 The Manager has not breached its certificate of incorporation or by-laws or any other agreement to which it is a party or by which it is bound in the course of conduct of its business and corporate affairs and has not breached any applicable laws and regulations, except for such breaches which would not have a materially adverse effect on the Manager’s ability to perform its obligations under this Agreement.

8.1.4 There are no Proceedings or investigations to which the Manager or any of its Affiliates is a party pending or, to the Manager’s knowledge, threatened, before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality (A) asserting the invalidity of this Agreement or any other Transaction Document, (B) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or any other Transaction Document or (C) seeking any determination or ruling that is reasonably likely to materially and adversely affect the performance by the Manager of its obligations under, or the validity or enforceability of, this Agreement or any other Transaction Document to which it is a party.

8.1.5 The execution, delivery and performance of the transactions contemplated by and the fulfillment of the terms of this Agreement and the other Transaction Documents will not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, the organizational documents of the Manager, or any material term of any indenture, agreement, mortgage, deed of trust, or other instrument to which Manager is a party or by which it is bound, or result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement, mortgage, deed of trust, or other instrument, or violate any law or any order, rule, or regulation applicable to Manager of any court or of any federal or state regulatory body, administrative agency, or other Governmental Authority having jurisdiction over Manager or any of its properties, in each case, other than any conflict, breach, default, Lien, or violation that would not reasonably be expected to result in a Material Adverse Change.

8.1.6 The Manager shall take all actions as may be necessary to perform the Issuer’s obligations under Section 604 of the Indenture.

8.1.7 The Manager will fulfill all of its obligations as lessor under any Lease Agreement to which a Managed Container is subject except where any such nonfulfillment would not reasonably be expected to materially and adversely affect the rights of the Owner under such Lease. The Manager shall use commercially reasonable efforts to perform all of the Owner’s duties and obligations under the Transaction Documents to which the Owner is a party; provided, however, that nothing contained herein shall be construed as an express or implied guaranty by the Manager of the Notes or any other Outstanding Obligation incurred by the Owner.

8.1.8 Promptly, but in any case within seven (7) Business Days of an Authorized Officer becoming aware of a Manager Default, Early Amortization Event or an Event of Default, and which, in each case, has not been waived in writing by the Requisite Global Majority, the Manager shall deliver to the Owner, the Administrative Agent, the Indenture Trustee and each Series Enhancer a written notice describing the nature of such event and period of existence and, in the case of a Manager Default, the action the Manager is taking or proposed to take with respect thereto.

 

 

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8.1.9 Since December 31, 2007, there has been no Material Adverse Change in the financial condition of the Manager.

8.1.10 The Manager will operate the Managed Containers so as not knowingly cause a violation of the Trading With the Enemy Act (50 U.S.C. § 1 et seq., as amended) (the “Trading With the Enemy Act”) or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) (the “Foreign Assets Control Regulations”) or any enabling legislation or executive order relating thereto (which for the avoidance of doubt shall include, but shall not be limited to (a) Executive Order 13224 of September 21, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the “Executive Order”) and (b) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56)). Furthermore, none of the Manager or its Affiliates (i) is or will become a “blocked person” as described in the Executive Order, the Trading With the Enemy Act or the Foreign Assets Control Regulations or (ii) engages or will engage in any dealings or transactions, or be otherwise associated, with any such “blocked person.”

8.1.11 The credit and collection policy used by the Manager as in effect on the Closing Date (which policy also addresses the criteria under which a lessee is allowed to self-insure for property and liability risks) is attached as Exhibit C hereto. The credit and collection policy used by the Manager is subject to modification from time to time at the discretion of the Manager. The “Credit and Collection Policy” shall mean the credit and collection policy used by the Manager as modified by the Manager from time to time.

8.1.12 The depreciation policy as in effect on the Closing Date used in the calculation of the Asset Base for the purposes of the Transaction Documents is attached as Exhibit E hereto.

8.2 Owner Representations. The Owner represents and warrants to the Manager:

8.2.1 The Owner is a limited liability company duly organized and validly existing under the laws of Delaware;

8.2.2 The Owner has the requisite power and authority to enter into and perform its obligations under this Agreement and all requisite limited liability company authorizations have been given for it to enter into this Agreement and to perform all the matters envisaged hereby, this Agreement has been duly executed and delivered by the Owner and constitutes the valid, legally binding and enforceable obligation of the Owner, subject to bankruptcy, insolvency, moratorium, reorganization and other laws of general applicability relating to or affecting creditors’ rights and to general equity principles; and

8.2.3 The Owner has not breached its limited liability company agreement or any other agreement to which it is a party or by which it is bound in the course of conduct of its business and corporate affairs and has not breached any applicable laws and regulations of Delaware in such manner as would in any case have a materially adverse effect on its ability to perform its obligations under this Agreement.

 

 

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8.2.4 Since its formation, there has been no Material Adverse Change in the financial condition of the Owner.

8.3 Covenants of the Manager.

8.3.1 Location of Books and Records. The Manager shall not change the location at which the Owner’s books and records are maintained unless (i) the Manager shall have given the Indenture Trustee, the Administrative Agent and each Series Enhancer at least thirty (30) days’ prior written notice thereof and (ii) the Manager shall cause to be filed any necessary registration of charges or documents of similar import necessary to continue the Indenture Trustee’s security interest in the Collateral.

8.3.2 Liens. Except for the Lien created pursuant to the Contribution and Sale Agreement and Permitted Encumbrances: (a) Manager agrees not to create, incur, or grant, directly or indirectly, any lien, security interest, pledge or hypothecation of any kind on or concerning (i) its rights under this Agreement or (ii) the Managed Containers or any interest therein; and (b) Manager shall promptly take, or cause to be taken, such action as may be necessary to discharge any such lien arising by, through or under the Manager.

8.3.3 UNIDROIT Convention. The Manager will comply with the terms and provisions of the UNIDROIT Convention on Intentional Interests in Mobile Equipment or any other internationally recognized system for recording interests in or liens against shipping containers at the time that such convention is adopted for containers.

8.3.4 Identification of Gross Lease Revenues and Direct Operating Expense; Transfer of Gross Lease Revenues. The Manager will establish and maintain such procedures as are necessary for determining and for identifying Container Revenues and Direct Operating Expenses to a specific Managed Container. Notwithstanding the foregoing, Manager shall have the right to allocate various indirect overhead expenses among containers in the Container Fleet (including the Managed Containers) in any way it deems appropriate as long as such allocation is non-discriminatory, fair and equitable, after giving due recognition to the cost, age and other factors relevant to the Managed Containers as compared to other containers in the Container Fleet.

8.3.5 Compliance with Credit and Collection Policy. The Manager will comply in all material respects with the Credit and Collection Policy in regard to the origination of, and amendments and modifications to, Leases of Managed Containers. The Manager shall not amend the Credit and Collection Policy in any respect which would materially and adversely affect the Noteholders without the prior written consent of the Requisite Global Majority in each instance. The Manager shall promptly provide the Owner, the Administrative Agent and the Indenture Trustee with a copy of all amendments to the Credit and Collection Policy.

8.3.6 Inspections. The Manager shall, upon reasonable prior notice, allow the Indenture Trustee, the Administrative Agent, each Hedge Counterparty and each Series Enhancer to inspect, under guidance of officers of the Manager, the Manager’s facilities during normal

 

 

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business hours; provided, however, that unless an Event of Default or a Manager Default shall have occurred and then be continuing, the Indenture Trustee, the Administrative Agent, the Hedge Counterparties and the Series Enhancers may request, in the aggregate, only one inspection under this Section 8.3.6 during any twelve-month period.

8.3.7 Container Management System. Without the prior written consent of the Indenture Trustee, acting at the direction of the Requisite Global Majority, the Manager agrees that it will not grant to any Person, or permit any Person to obtain, a Lien (other than items listed in clauses (i), (ii), (iii), (iv) or (v) of the definition of “Permitted Encumbrances” (as determined as though the Container Management System were deemed “Collateral” for the purposes of the definition of “Permitted Encumbrance”)) over the Container Management System.

8.3.8 Rating Agency Notices. Subject to the application of applicable law, the Manager shall promptly deliver a copy of any written notice concerning the Owner’s credit rating received by it from any Rating Agency to the Indenture Trustee, the Administrative Agent and each Series Enhancer.

Section 9. Manager Default.

9.1 Manager Default. Each of the following is a Manager Default:

9.1.1 The Manager shall fail to make any deposits of Container Revenues, Sales Proceeds, Casualty Proceeds or any other amounts due and payable under this Agreement to the Trust Account within three (3) Business Days after the date such deposit is due; provided, that if such Container Revenues, Sales Proceeds, Casualty Proceeds or other amounts are on deposit in the Concentration Account (or a related post office box or lockbox), failure of the bank holding the Concentration Account to comply with the instructions of the Manager (or to comply with the terms of any intercreditor agreement) shall not constitute a Manager Default.

9.1.2 The Manager shall fail (A) to deliver any report required to be delivered to the Indenture Trustee pursuant to the terms of Sections 4.1.2 or 4.1.3 hereof such failure shall continue unremedied for three (3) Business Days or (B) in any material respect to perform the covenant of the Manager to deliver financial statements set forth in the second sentence of Section 4.1.1 and such failure shall continue unremedied for thirty (30) days after the date on which there has been given to the Manager by the Indenture Trustee, the Administrative Agent, any Series Enhancer or any Noteholder a written notice specifying such default or breach and requiring it to be remedied; provided, however, that (x) if the reason for such failure is primarily attributable to changes in accounting principles or interpretations or the application of the same, (y) such changes are not related to the assets of the Issuer and (z) no Manager Default then exists under Sections 9.1.9 through 9.1.12 of this Agreement, then such failure shall not constitute a Manager Default under this subsection 9.1.2(B) unless such failure materially and adversely affects the interests of any Noteholder or any Series Enhancer (if such Series Enhancer is then the Control Party for a Series of Outstanding Notes or shall have made an unreimbursed payment on its Enhancement Agreement).

 

 

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9.1.3 The Manager shall fail to (A) deliver any report required to be delivered to the Indenture Trustee pursuant to the terms hereof or of any other Transaction Document (which is not otherwise addressed in Section 9.1.2) and such failure shall continue unremedied for thirty (30) days, or (B) perform or observe, or cause to be performed or observed, in any material respect any other covenant or agreement contained herein or in any other Transaction Document (including in its capacity as Seller) (which is not otherwise addressed in this Section 9.1), which failure materially and adversely affects the interests of the Noteholders or (if it is then the Control Party for a Series of Outstanding Notes or shall have made an unreimbursed payment on its Enhancement Agreement) any Series Enhancer and such failure, if capable of remedy, shall continue unremedied for a period of thirty (30) days after the date on which the Manager has received written notice specifying such failure from the Owner, the Indenture Trustee, any Noteholder, the Administrative Agent, any Series Enhancer or any other Person.

9.1.4 Any representation or warranty made by the Manager in this Agreement or any other Transaction Document (including in its capacity as Seller), or in any certificate, report or financial statement delivered by it pursuant hereto or thereto proves to have been untrue in any material respect when made, such breach materially and adversely affects the interests of the Noteholders or (if it is then the Control Party for a Series of Outstanding Notes or shall have made an unreimbursed payment on its Enhancement Agreement) any Series Enhancer and such breach, if capable of remedy, shall continue unremedied for a period of thirty (30) days after the date on which the Manager has received written notice specifying such failure from the Owner, the Indenture Trustee, any Noteholder, the Administrative Agent, any Series Enhancer or any other Person.

9.1.5 TAL ceases to be engaged in the container leasing business.

9.1.6 The Manager shall commence a voluntary case concerning itself under the Bankruptcy Code; or an involuntary case is commenced against the Manager or any of its Subsidiaries and the petition is not controverted within 10 days, or is not dismissed within 60 days, after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of the Manager; or the Manager commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Manager and such proceeding remains undismissed for a period of 60 days; or the Manager is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Manager suffers any appointment of any custodian or the like for it or any substantial part of its property to continue undischarged or unstayed for a period of 60 days; or the Manager makes a general assignment for the benefit of creditors; or any action is taken by the Manager for the purpose of effecting any of the foregoing;

9.1.7 Except as permitted by Sections 2 and 13 hereof, Manager assigns or attempts to assign its interest under this Agreement.

9.1.8 A Change of Control shall have occurred with respect to the Manager.

9.1.9 The Leverage Ratio of TAL International Group as of the last day of any fiscal quarter shall be in excess of 4.75 to 1.00.

 

 

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9.1.10 As of the last day of each fiscal quarter beginning with the fiscal quarter ending September 30, 2008, the Consolidated EBIT to Consolidated Cash Interest Expense Ratio is less than 1.10 to 1.00.

9.1.11 As of the last day of each fiscal quarter, the Consolidated Tangible Net Worth of TAL International Group is less than the sum of (i) $321,351,326; plus (ii) an amount equal to fifty percent (50%) of the cumulative sum of the aggregate net income (or loss) of TAL International Group and its Consolidated Subsidiaries (as such term is defined in the Credit Agreement) on a consolidated basis, determined in accordance with GAAP for the period commencing on January 1, 2006 and terminating on such date of determination.

9.1.12 TAL International Group, the Borrower (as such term is defined in the Credit Agreement) or any Restricted Subsidiary (as such term is defined in the Credit Agreement) fails to make any payment when due (beyond the applicable grace or cure period with respect thereto, if any) or defaults in the observance or performance (beyond the applicable grace or cure period with respect thereto, if any) of any payment obligation, or any other agreement or covenant with respect to the Indebtedness that, individually or in the aggregate for all such Persons, exceeds Twenty Million Dollars ($20,000,000) and the holder(s) of such Indebtedness has accelerated such Indebtedness.

9.1.13 One or more judgments or decrees shall be entered against TAL International Group, the Borrower (as such term is defined in the Credit Agreement) or any of its Restricted Subsidiaries (as such term is defined in the Credit Agreement) (other than a Special Purpose Vehicle (as such term is defined in the Credit Agreement)) involving a liability (to the extent not paid when due or covered by a reputable and solvent insurance company (with any portion of any judgment or decree not so covered to be included in any determination hereunder)) equal to or in excess of Twenty Million Dollars ($20,000,000) for all such judgments and decrees and all such judgments or decrees shall either be final and non-appealable or shall not have been vacated, discharged or stayed or bonded pending appeal for any period of 30 consecutive days.

A Manager Default may be waived in a written instrument executed by the Requisite Global Majority in each such instance. Any such waiver of a Manager Default shall not be construed as a waiver of any subsequent Manager Default. No delay by the Requisite Global Majority or any of its assigns, shall constitute any such waiver or prejudice the Requisite Global Majority in exercising any right, power or privilege arising out of such Manager Default.

9.2 Remedies. If a Manager Default shall have occurred and be continuing, and any Notes are then Outstanding, the Indenture Trustee, acting at the direction of the Requisite Global Majority and in the Requisite Global Majority’s discretion, shall have the right (upon written notice (a “Manager Termination Notice”) to the Manager, the Issuer and the Rating Agencies), in addition to other rights or remedies that the Issuer or its assignee may have under any Applicable Law or in equity to: (i) terminate this Agreement, (ii) take control of the Managed Containers wherever located, subject to the rights of lessees under Lease Agreements to which any of the Managed Containers shall at the time be subject or to appoint a replacement Manager to manage the Managed Containers, and (iii) appoint an independent auditor of national reputation and mutually acceptable to the Issuer and the Requisite Global Majority to verify that all prior

 

 

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Manager Reports and Asset Base Certificates prepared by the Manager are in accordance with this Agreement. Notwithstanding such termination, until the Manager is notified of the appointment of a replacement manager and the replacement manager has assumed such responsibility, the Manager shall continue to manage the Managed Containers and the Owner’s business, and deposit into the Trust Account all Container Revenues, Sales Proceeds, Casualty Proceeds and other amounts, and submit all reports due hereunder and perform all other services required hereunder, all in accordance with this Agreement.

9.3 Transfer of Managed Containers. Upon any termination of this Agreement pursuant to Section 9.2, the Manager shall cooperate with the Owner, the Indenture Trustee, the Administrative Agent and the Requisite Global Majority in transferring management of the Managed Containers as provided in the Indenture, including, but not limited to making available all books and records (including computer systems and data contained therein) pertaining to the Manager’s activities hereunder, providing access to, and cooperating in the transfer of, information from the Manager’s computer system to the Owner’s or its designee’s system, promptly notifying lessees of the termination of management of the Managed Containers by the Manager and assumption of management by the Owner or its designee, depositing funds belonging to the Owner but not yet in the Trust Account to such account as designated by the Owner or its assignee, executing assignments of interests in Lease Agreements pertaining to the Managed Containers and taking any other action as may be reasonably requested by the Owner or its assignee to ensure the orderly assumption of management of the Managed Containers by the Owner or its designee. During such transition period, the outgoing Manager shall continue to provide notices pursuant to Section 8.1.8 and Section 6.19 of the Indenture that relate to occurrences of which it is aware.

9.4 Power of Attorney. The Manager hereby irrevocably constitutes and appoints the Indenture Trustee, with full power of substitution (such appointment being coupled with an interest), as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Manager and in the name of the Manager or in its own name, for the purpose of carrying out the terms of this Agreement, to take (subject to the limitations set forth below) any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, the Manager hereby gives the Indenture Trustee the power and right, on behalf of the Manager, without notice to or assent by the Manager (subject to the limitation set forth below), to do any or all of the following:

(i) So long as a Manager Default has occurred and is continuing and a Manager Termination Notice has been delivered in accordance with the terms hereof, at any time, in the name of the Manager or its own name, or otherwise, to take possession of and endorse and collect any checks, drafts, notes, acceptances or other instrument, general intangible or contract or any other Collateral and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Indenture Trustee or any Series Enhancer for the purpose of collecting any and all such moneys due under any account, instrument, general intangible or contract with respect to the Managed Containers and the other Collateral whenever payable;

 

 

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(ii) So long as a Manager Default has occurred and is continuing and a Manager Termination Notice has been delivered in accordance with the terms hereof, at any time, to enter and use the premises of the Manager and make use of the Manager’s computer database, software system and all other books and records relating to the Managed Containers and the other Collateral. The Manager hereby grants, and agrees to grant from time to time, to the Indenture Trustee a non-exclusive royalty-free license (such license not to be exercised until, and only so long as, a Manager Default has occurred and is continuing and a Manager Termination Notice has been delivered in accordance with the terms hereof) of all its intellectual property rights arising in connection with the software system used by the Manager in connection with the Managed Containers, such license to be irrevocable until the later of (a) the last date on which any Note was Outstanding or (b) the date on which all amounts owed to any Series Enhancer pursuant to the terms of the Indenture and the related Enhancement Agreement shall have been paid in full, subject, in the case of intellectual property rights held under license by the Manager, to the prior consent of the relevant licensor, if required, which consent the Manager undertakes to use its reasonable efforts forthwith to obtain at its own expense on terms reasonably acceptable to the Indenture Trustee and any Series Enhancer so long as a Manager Default has occurred and is continuing and a Manager Termination Notice has been delivered in accordance with the terms hereof; and

(iii) So long as an Event of Default or Manager Default has not occurred, upon the failure of the Manager to comply with the provisions of Section 8.1.6 (and so long as an Event of Default or Manager Default has occurred, whether or not the Manager has complied with the provisions of Section 8.1.6), to execute and deliver those agreements, instruments, documents and papers (including, without limitation, deeds of trust) as the Manager may otherwise be required to file in accordance with the provisions of Section 8.1.6 hereof.

The Manager hereby ratifies and confirms and agrees to ratify and confirm whatever any such attorney shall do or propose to do in the exercise or purported exercise of all or any of the powers, authorities and discretion referred to in this Section.

9.5 Owner Power of Attorney. The Owner hereby irrevocably constitutes and appoints the Indenture Trustee, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Owner and in the name of the Owner or in its own name, for the purpose of carrying out the terms of this Agreement and the other Transaction Documents to which the Owner is a party, to take (subject to the limitations set forth below) any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, the Owner hereby gives the Indenture Trustee the power and right, on behalf of the Owner, without notice to or assent by the Owner (subject to the limitation set forth below), to do any or all of the following:

(i) So long as a Manager Default has occurred and is continuing and a Manager Termination Notice has been delivered in accordance with the terms hereof, at any time, in the name of the Owner or its own name, or otherwise, to take possession of and indorse and collect any checks, drafts, notes, acceptances or other instrument, general intangible or contract or any other Collateral and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Indenture Trustee or any

 

 

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Series Enhancer for the purpose of collecting any and all such moneys due under any account, instrument, general intangible or contract with respect to the Managed Containers and the other Collateral whenever payable;

(ii) So long as an Event of Default or Manager Default has occurred and is continuing, at any time, to enter and use the premises of the Owner and make use of the Owner’s computer database, software system and all other books and records relating to the Managed Containers and the other Collateral. The Owner hereby grants, and agrees to grant from time to time, to the Indenture Trustee a non-exclusive royalty-free license (such license not to be exercised until, and only so long as, a Manager Default has occurred and is continuing and a Manager Termination Notice has been delivered in accordance with the terms hereof) of all its intellectual property rights arising in connection with the software system used by the Owner in connection with the Managed Containers, such license to be irrevocable until the later of (a) the last date on which any Note was Outstanding or (b) the date on which all amounts owed to any Series Enhancer pursuant to the terms of the Indenture and any related Enhancement Agreement shall have been paid in full, subject, in the case of intellectual property rights held under license by the Owner, to the prior consent of the relevant licensor, if required, which consent the Owner undertakes to use its reasonable efforts forthwith to obtain at its own expense on terms reasonably acceptable to the Indenture Trustee, the Administrative Agent and any Series Enhancer; and

(iii) So long as an Event of Default or Manager Default has not occurred, upon the failure of the Manager to comply with the provisions of Section 8.1.6 (and so long as an Event of Default or Manager Default has occurred, whether or not the Manager has complied with the provisions of Section 8.1.6), to execute and deliver those agreements, instruments, documents and papers (including, without limitation, deeds of trust) as the Owner (or the Manager, on behalf of the Owner) may otherwise be required to file in accordance with the provisions of Section 8.1.6 hereof or in accordance with Section 604 of the Indenture.

Section 10. No Partnership.

Except as otherwise provided herein, the Manager’s activities taken on behalf of the Owner hereunder will be taken solely as manager of the Managed Containers. The parties hereto expressly recognize and acknowledge that this Agreement is not intended to create a partnership, joint venture or other entity between the Manager and the Owner.

Section 11. No Warranties.

THE MANAGED CONTAINERS ARE BEING DELIVERED BY THE OWNER TO THE MANAGER “AS IS”. THE OWNER MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE CONDITION, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF THE MANAGED CONTAINERS, THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED.

 

 

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Section 12. Non-Exclusivity.

During the term of this Agreement, the Manager may provide container, management, sales, leasing or remarketing services directly or indirectly to any other Person or on behalf of any other Person.

Section 13. Assignment.

This Agreement, and the rights and duties of the Manager hereunder, may not be assigned by the Manager to any other Person without the prior written consent of the Owner, the Indenture Trustee (acting at the direction of the Requisite Global Majority) and the Administrative Agent. The Owner may charge, assign, pledge or hypothecate its rights (but not its obligations) under this Agreement as provided herein. The Manager hereby acknowledges that the Owner shall pledge all of its rights, title and interest under this Agreement to the Indenture Trustee (for the benefit of the Noteholders), and the Manager hereby consents to such pledge. The Manager will give any Rating Agency prior notice of any assignment effected pursuant to this Section 13.

Section 14. Indemnification.

14.1 By the Owner. The Owner, at its own expense, shall defend, indemnify and hold the Manager harmless from and against any and all claims, actions, damages, losses, liabilities, costs and expenses (including reasonable legal fees) (each, a “Claim”) incurred by or asserted against the Manager to the extent resulting or arising from the Manager’s performance of its obligations under this Agreement or from the Owner’s failure to comply with or perform its obligations under this Agreement, except for Claims which arise out of the Manager’s willful misconduct, or gross negligence, or failure to comply with or perform its obligations under this Agreement. Manager subordinates its claims under this Section 14.1 to all claims which have priority in payment pursuant to the provisions of Section 302 and Section 806 of the Indenture.

14.2 By the Manager.

14.2.1 The Manager, in its capacity as the Manager, agrees to, and hereby does, indemnify and hold harmless the Owner, the Indenture Trustee (for the benefit of the Noteholders), any Series Enhancer, any Hedge Counterparty, the Deal Agents (as such term is defined in the Note Purchase Agreement), the Liquidity Agents (as such term is defined in the Note Purchase Agreement), the Purchasers (as such term is defined in the Note Purchase Agreement), the Administrative Agent and their respective officers, directors, employees and agents (each of the foregoing, an “Indemnified Party”) against any and all liabilities, losses, damages, penalties, costs and expenses which may be incurred or suffered by such Indemnified Party (except to the extent caused by the gross negligence or willful misconduct on the part of the Indemnified Party) as a result of claims, actions, suits or judgments asserted or imposed against an Indemnified Party and arising out of (i) an action or inaction by the Manager that is contrary to the Servicing Standard or otherwise in violation of the terms of this Agreement; or (ii) any breach of or any inaccuracy in any representation or warranty made by the Manager in this Agreement or in any certificate delivered by the Manager pursuant hereto; or (iii) any breach of or failure by the Manager to perform any covenant or obligation of the Manager set out or contemplated in this Agreement; (iv) personal injury or property damage claim arising out of or

 

 

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in connection with the negligence of the Manager; or (v) any defense, setoff or counterclaim arising out of any negligence of the Manager or any acts or omissions of the Manager related to the performance hereunder of its duties with respect to the Managed Containers; provided however, that the foregoing indemnity shall in no way be deemed to impose on the Manager any obligation to reimburse an Indemnified Party for: (A) losses arising from the financial inability of the related obligor on a Lease Agreement to make the payments due thereunder or because the Leases otherwise are uncollectible, or (B) losses arising from the failure of the remarketing proceeds of the Managed Containers to achieve historical or projected levels for reasons other than the Manager’s failure to comply with the terms of this Agreement. The provisions of this Section 14.2 shall run directly to and be enforceable by an injured party, subject to the limitations hereof. The obligations of the Manager under this Section 14.2 shall survive the resignation or removal of the Manager and each Indemnified Party, the payment of the Notes and Outstanding Obligations and the termination of this Agreement or the Indenture; it being understood and agreed that the Manager shall have no liability for the actions or inactions of any replacement Manager.

14.2.2 The Manager shall pay any amounts owing by it pursuant to this Section 14 directly to the Indemnified Party, and such amounts shall not be deposited in the Trust Account.

14.2.3 Indemnification payments owing pursuant to the provisions of this Section 14 shall include, without limitation, reasonable and documented fees and expenses of counsel and expenses of litigation reasonably incurred.

Section 15. No Bankruptcy Petition Against the Owner.

The Manager will not, prior to the date that is one year and one day after the payment in full of all Outstanding Obligations under the Indenture or obligations of the Issuer under any of the other Transaction Documents, institute against the Owner, or join any other Person in instituting against the Owner, an Insolvency Proceeding. The provision of this Section 15 shall survive the termination of this Agreement.

Section 16. Notices.

All notices, demands or requests given pursuant to this Agreement shall be in writing, sent by internationally recognized overnight courier service or by telecopy or hand delivery, to the following addresses:

 

To the Manager:

TAL International Container Corporation

 

100 Manhattanville Road
Purchase, New York 10577-2135
Attn: Jeffrey Casucci, Vice President, Treasury and Credit
Fax: (914) 697-2526

 

 

23

 



 

 

with a copy to:

 

 

 

TAL International Container Corporation
100 Manhattanville Road
Purchase, New York 10577-2135
Attn: Marc A. Pearlin, Vice President, General Counsel & Secretary
Fax: (914) 697-2526

 

 

To the Owner:

TAL Advantage II LLC
100 Manhattanville Road
Purchase, New York 10577-2135
Attn: Jeffrey Casucci

 

 

 

with a copy to:

 

 

 

TAL International Container Corporation
100 Manhattanville Road
Purchase, New York 10577-2135
Attn: Jeffrey Casucci, Vice President, Treasury and Credit
Fax: (914) 697-2526

 

 

To the Indenture Trustee:

U.S. Bank National Association
60 Livingston Avenue
St. Paul, Minnesota 55107
Attention: TAL Advantage II, LLC, Variable Rate Secured Notes, Series 2008-1

 

Fax: 651-495-8090

 

To the Administrative Agent:

Fortis Capital Corp.

 

Loan Syndications/Agency
520 Madison Avenue
New York, NY 10022
Attn: Gloria Beloti-Fields, Assistant Vice President
Fax: 212-340-5450

 

 

 

With a copy to:

 

 

 

Fortis Capital Corp.

 

Two Embarcadero Center – Suite 1330
San Francisco, CA 94111
Attn: Menno van Lacum
Fax: (415) 283-3046

 

 

To any Series Enhancer:

At the address set forth in the related Enhancement Agreement

   

To any Hedge Counterparty:

At the address set forth in the related Hedge Agreement

 

 

24

 



Notice shall be effective and deemed received (a) two days after being delivered to the courier service, if sent by courier, (b) upon receipt of confirmation of transmission, if sent by telecopy or (c) when delivered, if delivered by hand.

Section 17. Governing Law; Consent to Jurisdiction.

17.1 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BUT WITHOUT GIVING EFFECT TO ANY OTHER PRINCIPLES OF CONFLICTS OF LAW).

17.2 Consent to Jurisdiction. Any legal suit, action or proceeding against Owner or Manager arising out of or relating to this Agreement, or any transaction contemplated hereby, may be instituted in any federal or state court in the County of New York, State of New York and each of Owner and Manager hereby waives any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding, and, solely for the purposes of enforcing this Agreement, Owner and Manager each hereby irrevocably submits to the jurisdiction of any such court in any such suit, action or proceeding.

17.3 Waiver of Jury Trial. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, AS AGAINST EACH OTHER PARTY HERETO, ANY RIGHTS IT MAY HAVE TO A JURY TRIAL IN RESPECT OF ANY CIVIL ACTION OR PROCEEDING (WHETHER ARISING IN CONTRACT OR TORT OR OTHERWISE), INCLUDING ANY COUNTERCLAIM ARISING UNDER THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, INCLUDING IN RESPECT OF THE NEGOTIATION, ADMINISTRATION OR ENFORCEMENT HEREOF OR THEREOF.

Section 18. Successors and Assigns.

The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of the parties hereto.

Section 19. Severability.

If any term or provision of this Agreement or the performance thereof shall to any extent be or become invalid or unenforceable, such invalidity or unenforceability shall not affect or render invalid or unenforceable any other provisions of this Agreement, and this Agreement shall continue to be valid and enforceable to the fullest extent permitted by law.

Section 20. Entire Agreement; Amendments; Waiver.

This Agreement represents the entire agreement between the parties with respect to the subject matter hereof and may not be amended or modified except by an instrument in writing signed by the parties hereto and approved by the Administrative Agent and the Requisite Global Majority and, if such amendment or modification would cause any of the events set forth in Section 1002(a)(i) through (vii) of the Indenture to occur, the Persons specified in Section 1002(a) of the Indenture are then the Control Party for such Series or shall have made an

 

 

25

 



unreimbursed payment; provided, that, if any such amendment or modification would (i) reduce the amount payable to such Series Enhancer, (ii) amend the relative priority of any such payment pursuant to Sections 302 or 806 of the indenture (other than to increase the priority thereof) or increase the amount of any applicable dollar limitations on amounts having a higher payment priority to such payments pursuant to Sections 302 or 806 of the Indenture or otherwise change such payments in a manner adverse to such Series Enhancer, (iii) change the date on which or the amount of which, or the place or payment where, or the coin or currency in which, such amount is paid to such Series Enhancer, (iv) increase or accelerate such Series Enhancer’s payment obligations under its Enhancement Agreement or otherwise materially and adversely affect the rights, interests or obligations of such Series Enhancer under this Agreement and the other Transaction Documents, or (v) modify provisions of any Transaction Document relating to requirements that the consent of such Series Enhancer be obtained, the approval of such Series Enhancer shall be required. The Manager will send prior notice of any amendment or modification to the Rating Agencies setting forth in general terms the substance of such amendment or modification. Waiver of any terms or conditions of this Agreement (including any extension of time required for performance) shall be effective only if in writing and shall not be construed as a waiver of any subsequent breach or waiver of the same terms or conditions or a waiver of any other term or condition of this Agreement. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof.

Section 21. Counterparts.

This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile shall be effective as delivery of a manually executed counterpart of this Agreement.

Section 22. Intended Third Party Beneficiaries.

Each of the Administrative Agent, each Series Enhancer, the Requisite Global Majority and the Indenture Trustee are express third party beneficiaries of this Agreement; and, as such, shall have full power and authority to enforce the provisions of this Agreement against the parties hereto. Except as set forth in the immediately preceding sentence, this Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer on any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first written above.

 

 

 

TAL INTERNATIONAL CONTAINER
CORPORATION, as Manager

 

 

By: 

 

 

 

Title:

 

 



 

 

 

TAL ADVANTAGE II LLC, as Owner,

 

 

 

 

 

 

By:

TAL International Container Corporation,
its manager

       

 

By: 

 

 

 

Title:

 

 


EX-10.55 5 file5.htm CONTRIBUTION & SALE AGREEMENT, DATED AS OF 3-27-08

 

CONTRIBUTION AND SALE AGREEMENT

 

between

TAL INTERNATIONAL CONTAINER CORPORATION,

and

TAL ADVANTAGE II LLC

 

Dated as of

March 27, 2008

 

 

 



TABLE OF CONTENTS

 

 

 

Page

ARTICLE I

     

DEFINITIONS

     

SECTION 1.01

Definitions

1

SECTION 1.02

General Interpretive Principles

1

 

 

 

ARTICLE II

 

 

 

TRANSFER OF CONTAINERS

 

 

 

SECTION 2.01

[Reserved]

2

SECTION 2.02

Transferred Containers and Related Assets after the Closing Date

2

SECTION 2.03

Required Financing Statements; Marking of Records

3

SECTION 2.04

General Provisions Regarding All Transfers of Containers

4

 

 

 

ARTICLE III

 

 

 

REPRESENTATIONS AND WARRANTIES

 

 

 

SECTION 3.01

Representations and Warranties of the Seller

5

SECTION 3.02

Representations and Warranties of the Issuer

11

SECTION 3.03

Breach of Representations and Warranties Regarding Certain Transferred Assets

14

SECTION 3.04

Substitute Container

14

 

 

 

ARTICLE IV

 

 

 

COVENANTS OF THE SELLER

 

 

 

SECTION 4.01

Seller Covenants

15

SECTION 4.02

Pledge of Transferred Assets

18

 

 

 

ARTICLE V

 

 

 

CONDITIONS PRECEDENT

 

 

 

SECTION 5.01

Conditions to Issuer Obligations

18

SECTION 5.02

Conditions to the Seller’s Obligations

19

SECTION 5.03

Waiver of Conditions

19

 

 

-i-

 



TABLE OF CONTENTS

(continued)

 

ARTICLE VI

     

TERMINATION

 

 

 

   

Page

SECTION 6.01

Termination

19

SECTION 6.02

Effect of Termination

19

 

 

 

ARTICLE VII

 

 

 

INDEMNIFICATION PAYMENTS

 

 

 

SECTION 7.01

Indemnification

19

SECTION 7.02

Procedure for Indemnification

20

 

 

 

ARTICLE VIII

 

 

 

MISCELLANEOUS PROVISIONS

 

 

 

SECTION 8.01

Amendment

20

SECTION 8.02

Governing Law

21

SECTION 8.03

Notices

21

SECTION 8.04

Severability of Provisions

23

SECTION 8.05

Assignment

23

SECTION 8.06

Further Assurances

23

SECTION 8.07

Waiver; Cumulative Remedies

23

SECTION 8.08

Counterparts

23

SECTION 8.09

Binding

23

SECTION 8.10

Merger and Integration

24

SECTION 8.11

Headings

24

SECTION 8.12

Schedules and Exhibits

24

SECTION 8.13

Intended Third Party Beneficiaries

24

SECTION 8.14

Consent to Jurisdiction

24

SECTION 8.15

WAIVER OF JURY TRIAL

24

SECTION 8.16

No Claim

24

 

 

EXHIBIT A – [Reserved]

 

EXHIBIT B – Container Transfer Certificate

 

SCHEDULE 3.01 – Other Names of Seller

 

 

 

-ii-

 



 

CONTRIBUTION AND SALE AGREEMENT

THIS CONTRIBUTION AND SALE AGREEMENT, dated as of March 27, 2008 (as amended, modified or supplemented from time to time in accordance with the terms hereof, this “Agreement”), is entered into between TAL INTERNATIONAL CONTAINER CORPORATION (together with its permitted successors and assigns, the “Seller”), a Delaware corporation, and TAL ADVANTAGE II LLC (together with its permitted successors and assigns, the “Issuer”), a limited liability company organized under the laws of Delaware.

W I T N E S S E T H:

WHEREAS, the Seller wishes to transfer to the Issuer from time to time containers, leases and other related assets, and the Issuer desires to acquire such assets from the Seller, in each case on the terms and conditions set forth herein;

WHEREAS, the assets transferred by the Seller to the Issuer hereunder will subsequently be pledged by the Issuer to the Indenture Trustee as collateral for the Notes to be issued from time to time pursuant to the terms of the Indenture;

NOW THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01 Definitions. Capitalized terms used in this Agreement but not defined herein shall have the meaning assigned to such terms in Appendix A to the Indenture dated as of March 27, 2008, between the Issuer and U.S. Bank National Association, as Indenture Trustee, as such Appendix A may be amended, supplemented or otherwise modified from time to time in accordance with the terms of the Indenture.

SECTION 1.02 General Interpretive Principles. For purposes of this Agreement except as otherwise expressly provided or unless the context otherwise requires:

(a) the terms defined in this Agreement have the meanings assigned to them in this Agreement and include the plural as well as the singular, and the use of any gender herein shall be deemed to include the other gender;

(b) accounting terms not otherwise defined herein have the meanings assigned to them in accordance with Generally Accepted Accounting Principles;

(c) references herein to “Articles”, “Sections”, “Subsections”, “paragraphs”, and other subdivisions without reference to a document are to designated Articles, Sections, Subsections, paragraphs and other subdivisions of this Agreement;

 

 

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(d) a reference to a Subsection without further reference to a Section is a reference to such Subsection as contained in the same Section in which the reference appears, and this rule shall also apply to paragraphs and other subdivisions;

(e) the words “herein”, “hereof”, “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular provision; and

(f) the term “include” or “including” shall mean without limitation by reason of enumeration.

ARTICLE II

TRANSFER OF CONTAINERS

SECTION 2.01 [Reserved]

SECTION 2.02 Transferred Containers and Related Assets after the Closing Date.

(a) Subsequent to the Closing Date, the Seller may, from time to time, sell, transfer and convey, to the Issuer, and the Issuer may in its sole discretion, acquire from the Seller, all of such Seller’s rights, title and interest in, to and under such additional Containers and the Related Assets with respect thereto (collectively, the “Additional Transferred Assets”) as shall be identified from time to time on a Container Transfer Certificate substantially in the form of Exhibit B hereto to be delivered on such Transfer Date. The Seller and the Issuer hereby agree that the purchase price of such Additional Transferred Assets (such purchase price, the “Additional Purchase Price”) sold by the Seller on any such subsequent Transfer Date shall be an amount equal to the sum of (x) the sum of the Net Book Values (determined as of the last day of the month preceding such Transfer Date) of such additional Containers and (y) the sum of the Fair Market Values of such Related Assets. The Additional Purchase Price will be paid on the related Transfer Date in full.

At the option of the Seller, some or all of the Additional Transferred Assets may be transferred by the Seller to the Issuer as a capital contribution.

In connection with any transfer of Additional Transferred Assets to the Issuer, the Seller shall, on or prior to the respective Transfer Date, (i) execute and deliver each of the documents set forth in Section 2.02(b) hereof, and (ii) complete the actions required by Section 2.03 hereof.

(b) In connection with any transfer of Transferred Assets by the Seller to the Issuer in accordance with the provisions of Section 2.02 of this Agreement, the Seller shall execute and deliver to the Issuer (and the Issuer shall deliver to the Administrative Agent and the Indenture Trustee) on or before the related Transfer Date, each of the following documents:

(i) A completed Container Transfer Certificate which certificate shall operate as an assignment, without recourse, representation or warranty (except for the representations and warranties specifically set forth in this Agreement) of all such Seller’s right, title, and interest in and to the Transferred Assets identified in such Container Transfer Certificate;

 

 

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(ii) Completed UCC financing statements and documents of similar import, if applicable, described in Section 2.03(a) hereof, together with evidence of filing of such financing statements, changes or similar documents, in the appropriate filing offices and jurisdictions as may be required to perfect the Issuer’s ownership of the Related Assets; and

(iii) A supplement to the List of Containers (or, in the case of the initial Transfer Date, the List of Containers itself). Upon delivery of such supplement, the List of Containers shall be deemed to have been amended to incorporate the information contained in such supplement.

SECTION 2.03 Required Financing Statements; Marking of Records.

(a) In connection with the transfer by it on any Transfer Date, the Seller agrees to record and file, at its own expense, the following UCC financing statements (and/or amendments to previously filed UCC financing statements) with respect to the Related Assets, such filings to be made (unless otherwise requested by the Administrative Agent or any Series Enhancer) in each case only to the extent necessary pursuant to applicable law to perfect the ownership interest of the Issuer:

(i) UCC financing statements filed against the Seller and covering the Transferred Assets. Such financing statements (or documents of similar import) shall be filed in the appropriate filing offices in the jurisdiction in which the Seller is located (as defined in the UCC) or as otherwise required under Applicable Law;

(ii) UCC financing statements or documents of similar import, evidencing the release of the security interest of any other Person with respect to any of the Transferred Assets; and

(iii) With respect to each Finance Lease included in the Transferred Assets, a UCC financing statement (or document of similar import), naming each lessee of Containers subject to such Finance Lease, as debtor, the Seller, as secured party, and the Containers under such related Finance Lease as collateral, such financing statement against the lessee shall be filed in the appropriate filing offices in the jurisdiction in which the lessee is located (as determined under the UCC); provided, however, that the Seller shall not be required to change the name of the secured party as of record in any such filing office.

All UCC financing statements required pursuant to this Section 2.03 shall meet the requirements of Applicable Law. Nothing contained in this Section 2.03 shall limit the Seller’s obligation to file continuation or termination statements in accordance with Section 4.01(g) of this Agreement and Applicable Law.

 

 

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The Seller shall forward, promptly upon receipt, file-stamped copies of all UCC financing documents described in paragraphs (i) and (ii) above to the Indenture Trustee, the Administrative Agent and each Series Enhancer.

(b) In connection with each transfer of Transferred Assets, the Seller shall, at its own expense on or prior to each Transfer Date, cause its master accounting and data processing records to be marked to indicate that all right, title and interest in each Transferred Asset has been irrevocably and absolutely transferred to the Issuer.

SECTION 2.04 General Provisions Regarding All Transfers of Containers.

(a) Except as specifically provided in Sections 3.03 and 7.01 of this Agreement, all transfers of Transferred Assets by the Seller to the Issuer pursuant to this Agreement shall be without recourse to the Seller; it being understood that the Seller shall be liable to the Issuer for all representations, warranties, covenants and indemnities made by the Seller pursuant to the terms of this Agreement, all of which representations, warranties, covenants and indemnifications shall survive the transfer of such Transferred Assts hereunder. Notwithstanding any term or provision of this Agreement, nothing in this Agreement shall create (or shall be deemed to create) recourse to the Seller for (i) the failure of the lessees under the Leases included in the Transferred Assets to make any payments under such Leases or the Leases otherwise being uncollectible and/or (ii) the failure of the Issuer to realize an amount equal to the sum of (x) the Net Book Value of a Transferred Container and (y) the Fair Market Value of the Related Assets with respect to such Transferred Containers.

(b) The Seller and the Issuer intend all transfers of Transferred Assets to be “true sales” or “true contributions” by the Seller to the Issuer that are absolute and irrevocable and that provide the Issuer with the full benefits of ownership of the Transferred Assets, and neither the Seller nor the Issuer intend the transactions contemplated hereunder to be, or for any purpose to be characterized as, loans from the Issuer to the Seller. It is, further, not the intention of the Issuer or the Seller that the conveyance of the Transferred Assets by the Seller be deemed a grant of a security interest in the Transferred Assets by the Seller to the Issuer to secure a debt or other obligation of the Seller. However, in the event that, notwithstanding the intent of the parties, any Transferred Assets are considered to be property of the Seller’s estate, then (i) this Agreement also shall be deemed to be and hereby is a security agreement within the meaning of Applicable Law, and (ii) the conveyance by the Seller provided for in this Agreement shall be deemed to be a grant by the Seller to the Issuer of, and the Seller hereby grants to the Issuer, a security interest in and to all of the Seller’s right, title and interest in, to and under the Transferred Assets, whether now or hereafter existing or created, to secure (A) the rights of the Issuer hereunder, (B) a loan by the Issuer to the Seller in an amount equal to the sum of (1) the sum of the Net Book Values of all Transferred Containers and (2) the sum of the Fair Market Values of all Related Assets, in each case to the extent of all of the Transferred Containers transferred or purported to be transferred by the Seller hereunder, (C) without limiting the foregoing, the payment and performance of the Seller’s obligations (whether monetary or otherwise) hereunder, and (D) payment to the Issuer of all lease rentals, and other payments in respect of the Leases and proceeds of the Transferred Assets transferred or purported to be transferred hereunder. The Seller and the Issuer shall, to the extent consistent with this Agreement, take such actions as may be necessary to ensure that, if this Agreement were deemed

 

 

-4-

 



to create a security interest in the Transferred Assets, such security interest would be deemed to be a perfected security interest of first priority in favor of the Issuer under Applicable Law and will be maintained as such throughout the term of this Agreement. The Seller hereby irrevocably authorizes the Issuer (and the Issuer hereby authorizes the Indenture Trustee (as pledgee of the Issuer’s rights hereunder)), at any time, and from time to time, to file in any filing office in any jurisdiction any initial financing statements or documents of similar import and amendments thereto that (x) indicate Transferred Assets as collateral regardless of whether any particular asset included in the Transferred Assets falls within the scope of Article 9 of the UCC, and (y) provide any other information required for the sufficiency or filing office acceptance of any financing statement or document of similar import or amendment. The Seller agrees to furnish any such information to the Issuer promptly upon the Issuer’s request, and the Issuer agrees to furnish any such information to the Indenture Trustee (as pledgee of the Issuer’s rights hereunder) promptly upon the Indenture Trustee’s request. The Seller also ratifies its authorization for the Issuer and the Issuer also ratifies its authorization for the Indenture Trustee having filed in any jurisdiction any financing statements or documents of similar import or amendments thereto if filed prior to the date hereof.

(c) Consistent with the Issuer’s ownership of the Transferred Assets, as between the parties to this Agreement, the Issuer shall have the sole right to service, administer and collect the Transferred Assets and to assign and/or delegate such right to others;

(d) Except as specifically provided for in Section 3.03 and Section 3.04 hereof, the Issuer shall have no obligation to account to the Seller for the Transferred Assets. The Issuer shall have no obligation to account for, or to return rental payments on or with respect to any Transferred Asset, or any interest or other finance charge collected pursuant thereto, to the Seller, irrespective of whether such collections and charges are in excess of the Additional Purchase Price of such Transferred Asset. The Issuer shall have the sole right to retain any gains or profits created by buying, selling or holding the Transferred Assets and shall have the sole risk of and responsibility for losses or damages created by such buying, selling or holding;

(e) The Issuer shall have the unrestricted right to further assign, transfer, deliver, hypothecate, subdivide or otherwise deal with the Transferred Assets, and all of the Issuer’s right, title and interest in, to and under this Agreement, on whatever terms the Issuer shall determine, pursuant to this Agreement or otherwise.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

SECTION 3.01 Representations and Warranties of the Seller. The Seller hereby makes the following representations and warranties. The Issuer has relied upon such representations and warranties in accepting the conveyance of the Transferred Assets. Such representations and warranties are made only as of a Transfer Date with respect to the Transferred Assets transferred to the Issuer on such date and, with respect to the representation and warranty set forth in clause (v) below, as of the date which is two Business Days following the later of the acquisition of the applicable Transferred Asset by the Issuer or the inclusion of the applicable Transferred Asset in the Asset Base, but shall survive each transfer and conveyance of the respective Transferred Assets to the Issuer.

 

 

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(a) Organization and Good Standing. The Seller is a corporation duly organized, validly existing and in compliance under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business as such properties are currently owned and such business is currently conducted, had at all relevant times, and now has, power, authority, and legal right to acquire and own the Transferred Assets and to perform its obligations hereunder and under any Transaction Document to which it is a party;

(b) Due Qualification. The Seller is qualified as a foreign corporation in each jurisdiction where failure to be so qualified would have a material adverse effect upon its business and has obtained all necessary licenses and approvals as required under Applicable Law, in each case, where the failure to be so qualified, licensed or approved, would reasonably be expected to materially and adversely affect the ability of the Seller to perform its obligations under and comply with the terms of this Agreement and any other Transaction Document to which it is a party;

(c) Power and Authority; Due Execution and Delivery. The Seller has the corporate power and authority to execute and deliver this Agreement and any other Transaction Document to which it is a party and to carry out the terms thereof; the Seller has duly authorized the transfer and conveyance to the Issuer of the Transferred Assets by all necessary corporate action; the execution, delivery, and performance by the Seller of this Agreement and any other Transaction Document to which it is a party has been duly authorized by the Seller by all necessary corporate action and this Agreement and any other Transaction Document to which it is a party have been duly executed and delivered by the Seller;

(d) Legal Name. The legal name of the Seller is as set forth on the signature page of the Seller for this Agreement, and, except as set forth in Schedule 3.01 hereof, in the five years preceding the date of this Agreement: (a) the Seller has not changed its name, the Seller has not used, and does not currently use, any trade names, fictitious names, assumed names or “doing business as” names, and (b) the Seller has not been known by any name other than “TAL International Container Corporation”;

(e) Valid Assignment; Binding Obligations. This Agreement constitutes a valid transfer and conveyance to the Issuer of all right, title, and interest of the Seller in, to and under the Transferred Assets and the Transferred Assets will be held by the Issuer free and clear of any Lien of any Person claiming through or under the Seller, except for Permitted Encumbrances; and this Agreement and each other Transaction Document to which the Seller is a party, when duly executed and delivered by the other parties thereto, will constitute a legal, valid, and binding obligation of the Seller enforceable against the Seller in accordance with its terms subject as to enforceability to applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or other laws affecting creditors’ rights generally and to gen eral principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law);

 

 

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(f) No Violation. The consummation of the transactions contemplated by and the fulfillment of the terms of this Agreement and the Transaction Documents to which it is a party will not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, the charter documents or by-laws of the Seller, or any material term of any indenture, agreement, mortgage, deed of trust, or other instrument to which the Seller is a party or by which it is bound, or result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement, mortgage, deed of trust, or other instrument, other than this Agreement and the Indenture, or violate any material provision of any law, order, rule, or regulati on applicable to the Seller of any court or of any federal or state regulatory body, administrative agency, or other Governmental Authority having jurisdiction over the Seller or any of its properties, in each case, other than any conflict, breach, default, Lien, or violation that would not reasonably be expected to result in a Material Adverse Change;

(g) No Proceedings or Injunctions. There are (i) no actions, suits, proceedings or investigations pending, or, to the knowledge of the Seller, threatened, before any court, regulatory body, administrative agency, or other tribunal or Governmental Authority (A) asserting the invalidity of this Agreement or any other Transaction Document to which it is a party, (B) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or any other Transaction Document to which it is a party, or (C) seeking any determination or ruling that might materially and adversely affect the performance by the Seller of its obligations under, or the validity or enforceability of, this Agreement or any other Transaction Document to which it is a party, and (ii) no injunctions, writs, restraining orders or other orde rs are in effect against the Seller that would materially and adversely affect its ability to perform under this Agreement or any other Transaction Document to which it is a party;

(h) Compliance with Law. The Seller:

(i) is not in violation of any laws, ordinances, governmental rules or regulations or any court order to which it is subject or by which it is bound, in each case the violation of which would reasonably be expected to materially and adversely affect the ability of the Seller to perform its obligations under this Agreement or any other Transaction Document to which it is a party; and

(ii) has obtained all licenses, permits, franchises or other governmental authorizations necessary to the ownership of its property or to the conduct of its business including, without limitation, with respect to transactions contemplated by this Agreement and the other Transaction Documents to which it is a party, in each case, other than any such license, permit, franchise or other authorization the failure to so obtain will not reasonably be expected to result in a Material Adverse Change;

(i) Insolvency. The Seller is not insolvent under the Insolvency Law and will not be rendered insolvent by the transactions contemplated by this Agreement; the Seller is paying its debts as they become due and, after giving effect to the transactions contemplated hereby, will have adequate capital to conduct its business;

(j) [Reserved];

 

 

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(k) Place of Business. As of the Closing Date, the principal place of business and chief executive office of the Seller and the place where the accounting books and records of the Seller are maintained is located at its address set forth in Section 8.03 and has been located at such address at all times since the later of (i) the date of formation of the Seller, and (ii) the date that is five years prior to the Closing Date;

(l) Accounting and Tax Treatment. The Seller will treat the transfer of the Transferred Assets to the Issuer pursuant to this Agreement as a capital contribution (in part) and sale (in part) of such Transferred Assets (which allocation between capital contribution and sale will be determined in accordance with Section 2.02 hereof) for financial reporting and accounting purposes. The Seller will treat the transfer of the Transferred Assets as a transfer to an entity disregarded as separate from its owner for U.S. federal, state and local income tax purposes;

(m) Bulk Transfer Provisions. No transfer, assignment or conveyance of the Transferred Assets by the Seller to the Issuer contemplated by this Agreement will be subject to the bulk transfer or any similar statutory provisions in effect in any applicable jurisdiction;

(n) All Representations and Warranties True. All representations, warranties, certifications and statements made by the Seller in any certificate or other document delivered in connection with the closing of the transactions contemplated by the Transaction Documents including all representations, warranties, certifications and statements made to Mayer Brown LLP in support of its opinions issued and delivered in connection with the issuance of the Notes and each of the factual assumptions contained in such opinions, to the extent compliance with such assumptions is in the control of the Seller, are true and correct in all material respects as of the date made and do not omit or fail to state a material fact necessary to make the statements contained therein not misleading as of such date.

(o) Approvals. All approvals, authorizations, consents, orders or other actions of any Person required to be obtained by the Seller in order to execute and deliver this Agreement and any other Transaction Documents to which it is a party have been or will be taken or obtained on or prior to the Closing Date;

(p) Financial Statements. The consolidated balance sheet of TAL International Group at December 31, 2007 and the consolidated statements of income, retained earnings and cash flows for the twelve months ended on such date, are accompanied by reports thereon containing opinions without qualification, except as therein noted, by the independent accountants, have been prepared in accordance with Generally Accepted Accounting Principles consistently applied, and present fairly the financial position of TAL International Group and its consolidated Subsidiaries (including the Seller) as of such dates and the results of their operations for such periods;

Since December 31, 2007 there has been no change in the business or financial condition of TAL International Group and its consolidated Subsidiaries (including the Seller) except as disclosed in TAL International Group’s financial reports, or changes in the ordinary course of business, which individually or in the aggregate may have been materially adverse. Neither TAL International Group nor any of its consolidated Subsidiaries (including the Seller)

 

 

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has any material liabilities or obligations other than those disclosed in the financial statements (including the notes thereto) referred to in the preceding paragraph or for which adequate reserves are reflected in such financial statements or which were incurred in the ordinary course of business since the date of such financial statements;

(q) Governmental Consent. No consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority is or will be necessary or required on the part of the Seller in connection with the execution, delivery, legality, binding effect or enforceability of this Agreement or any other Transaction Document to which it is a party or the transfer and conveyance of the Transferred Assets hereunder except for (A) the filing of any financing statements and (B) such the failure of which to make or obtain, individually or in the aggregate, would not reasonably be expected to result in a material adverse effect on the Seller;

(r) Investment Company. The Seller is not an “investment company” or a company controlled by an “investment company” within the meaning of the Investment Company Act of 1940, as amended;

(s) Substantive Consolidation. The Seller is operated such that the Issuer would not be “substantively consolidated” in the bankruptcy estate of the Seller and its separate existence disregarded in the event of the bankruptcy of the Seller under any applicable Insolvency Law;

(t) Financial Statements. The financial statements and books and records of the Seller will reflect the separate existence of the Issuer, the annual consolidated financial statements of the Seller after the date hereof will contain disclosures to the effect that the Seller has or will have one or more direct and indirect Subsidiaries that were or may be established as bankruptcy remote entities to facilitate asset securitization transactions;

(u) Valid Business Purpose. The transfers and conveyances of Transferred Assets by the Seller to the Issuer pursuant to the terms of this Agreement are being consummated by the Seller in good faith, with no contemplation of insolvency and with no intent to hinder, delay or defraud any of its present or future creditors of the Seller;

(v) Title to Containers. Immediately prior to the transfer of any Transferred Asset to the Issuer pursuant to the terms of this Agreement, the Seller had good and marketable title to such Transferred Asset, free and clear of all Liens, except (i) Permitted Encumbrances and (ii) a manufacturer’s or vendor’s lien for the unpaid purchase price of such Transferred Asset so long as such unpaid purchase price is paid within two Business Days following the later of the acquisition of such Transferred Asset by the Issuer or the inclusion of such Transferred Asset in the Asset Base. The Seller has not authorized the filing of, and is not aware of, any financing statements against the Seller that include a description of collateral covering the Transferred Assets other than any financing statement or document of similar imp ort (i) in favor of the Issuer pursuant to this Agreement or (ii) that has been terminated. The Seller is not aware of any judgment or tax lien filings against the Seller;

 

 

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(w) Rights to Lease Agreements are Assignable. The assignment of the rights with respect to each Lease Agreement (to the extent related to a Transferred Container) and all scheduled lease payments to become due thereunder (which relate to a Transferred Container) pursuant to this Agreement does not violate the terms of the applicable Lease Agreement and such assignment by the Seller is permitted without the consent of any Person other than consents which will have been obtained on or before the related Transfer Date;

(x) All Necessary Action Taken. Immediately after each of the transfers and conveyances to the Issuer as contemplated in this Agreement, all necessary action will have been taken by the Seller to validly transfer and convey to the Issuer all right, title and interest of the Seller in and to the Transferred Containers and the Related Assets;

(y) Eligible Container. As of the related Transfer Date for a Container, such Container is an Eligible Container.

(z) Ordinary Course of Business. All Lease Agreements related to Transferred Containers were originated in the ordinary course of business of the Seller’s business and in accordance with the Credit and Collection Policy as in effect on such origination date;

(aa) Binding Obligation. Each Lease included in the Related Assets being transferred to the Issuer on the applicable Transfer Date represents the genuine, legal, valid and binding payment obligation in writing of the related lessee, enforceable in accordance with its terms, except only as such enforcement may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally;

(bb) No Defenses. No right of rescission, setoff, counterclaim or defense exists or has been asserted in writing or threatened in writing with respect to any Lease included in the Related Assets being transferred to the Issuer on the applicable Transfer Date. The exercise of any right under any such Lease will not render such Lease unenforceable in whole or in part or subject to any such right of rescission, setoff, counterclaim or defense;

(cc) Servicing. The servicing of each Lease included in the Related Assets and the collection practices relating thereto have been lawful and in accordance with the standards set forth in the Credit and Collection Policy;

(dd) Seller Acquisition Cost. One of the following: (A) with respect to any Container originally acquired by the Seller subsequent to August 1, 2005, the vendor’s or manufacturer’s invoice price of such Container was representative of the market price of containers of similar specifications with such vendor or manufacturer on the date on which the Seller placed the order for such Container with the vendor or manufacturer thereof; or (B) with respect to any Container not covered by clause (A), the purchase price allocated to such container by the Seller was reflective of the market value (as determined in the Issuer’s good faith estimation) of such class of Container on the Closing Date;

(ee) Creation of Security Interest. In the event that, contrary to the intention of the parties hereto, the transfer of the Transferred Assets pursuant to the terms of this Agreement is held not to constitute a “true sale” or a “true contribution”, this Agreement creates a valid and continuing security interest (as defined in the UCC) in the Transferred Assets in favor of the Issuer, which security interest is prior to all other Liens other than Permitted Encumbrances, and is enforceable as such against creditors of and purchasers from the Seller;

 

 

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(ff) UCC Classification. As of the Transfer Date for a Transferred Container: (x) such Transferred Container constitutes “goods” within the meaning of the applicable UCC; (y) the related Lease constitutes “tangible chattel paper” within the meaning of the UCC; and (z) the lease receivables under such Lease constitute “accounts” or “proceeds” of such Lease within the meaning of the UCC;

(gg) Perfection of Security Interest. The Seller has caused the filing of all appropriate financing statements or documents of similar import in the proper filing office in the appropriate jurisdictions under Applicable Law in order to perfect the Issuer’s ownership interest in the Transferred Assets. All financing statements filed or to be filed against the Seller in favor of the Issuer in connection herewith contain a statement to the following effect: “A purchase of or any other security interest in any collateral described in this financing statement will violate the rights of the Issuer and the Indenture Trustee (as the pledgee of the Issuer)”;

(hh) Possession of Leases. Aside from any original counterparts of such Lease included in such Transferred Assets in the possession of the lessee, the only other original counterpart(s) of such Lease is in the possession of the Manager or an Affiliate of the Manager. Such Lease (to the extent that such Lease relates to the Transferred Containers) does not have any marks or notations indicating that such Lease (to the extent that such Lease relates to the Transferred Containers) has been pledged, assigned or otherwise conveyed to any Person.

SECTION 3.02 Representations and Warranties of the Issuer. The Issuer hereby makes the following representations and warranties. The Seller has relied upon such representations and warranties in transferring the Transferred Assets to the Issuer. Such representations and warranties speak only as of the Transfer Date with respect to the Transferred Assets transferred to the Issuer on such date, but shall survive each transfer and conveyance of the respective Transferred Assets to the Issuer.

(a) Organization and Good Standing. The Issuer is a limited liability company duly organized and validly existing in compliance under the laws of the State of Delaware, with full corporate power and authority to own and operate its properties and to conduct its business as presently conducted and to enter into and perform its obligations under this Agreement and each other Transaction Document to which it is a party and the transactions contemplated hereby and thereby;

(b) Due Qualification. The Issuer is duly qualified to do business as a foreign company in good standing, and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of property or the conduct of its business requires such qualification, except to the extent that the failure to be so qualified, licensed or approved would not, in the aggregate, materially and adversely affect the ability of the Issuer to perform its obligations under and comply with the terms of this Agreement or any other Transaction Documents to which it is a party;

 

 

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(c) Power and Authority. The Issuer has the corporate power and authority to execute and deliver this Agreement and to carry out its terms; and the execution, delivery, and performance of this Agreement by the Issuer have been duly authorized by the Issuer by all necessary company action;

(d) Binding Obligations. This Agreement and each other Transaction Document to which the Issuer is a party, when duly executed and delivered by the other parties hereto or thereto, will constitute a legal, valid, and binding obligation of the Issuer enforceable in accordance with its terms subject as to enforceability to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors’ rights generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law);

(e) No Violation. The consummation of the transactions contemplated by and the fulfillment of the terms of this Agreement and the Transaction Documents to which it is a party will not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, the charter documents or by-laws of the Issuer, or any material term of any indenture, agreement, mortgage, deed of trust, or other instrument to which the Issuer is a party or by which it is bound, or result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement, mortgage, deed of trust, or other instrument, other than pursuant to the Indenture, or violate any law or any order, rule, or regulation applicable to the Issuer of any court or of any federal or state regulatory body, administrative agency, or other Governmental Authority having jurisdiction over the Issuer or any of its properties;

(f) No Proceedings or Injunctions. There are (i) no proceedings or investigations to which the Issuer is a party pending or, to the knowledge of Issuer, threatened before any court, regulatory body, administrative agency or other tribunal or Governmental Authority (A) asserting the invalidity of this Agreement or any of the other Transaction Documents to which the Issuer is a party, (B) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or any of the other Transaction Documents to which the Issuer is a party, or (C) seeking any determination or ruling that would materially and adversely affect the performance by the Issuer of its obligations under, or the validity or enforceability of, this Agreement or the other Transaction Documents to which the Issuer is a party and (ii) no inju nctions, writs, restraining orders or other orders are in effect against the Issuer that would adversely affect its ability to perform under this Agreement or the other Transaction Documents to which it is a party;

(g) Approvals. All approvals, authorizations, consents, orders or other actions of any Person required to be obtained by the Issuer in connection with the execution and delivery of this Agreement or any other Transaction Document to which it is a party have been or will be taken or obtained on or prior to the Closing Date;

(h) Solvency. The Issuer is not insolvent under the Insolvency Law and will not be rendered insolvent by the transactions contemplated by this Agreement; the Issuer is paying its debts as they become due and, after giving effect to the transactions contemplated hereby, will have adequate capital to conduct its business;

 

 

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(i) Principal Place of Business; Trade Names. The Issuer is a limited liability company organized under the laws of the State of Delaware. The Issuer’s only “place of business” (as such term is referred to in Section 9-307 of the UCC) and its “chief executive office” (as such term is referred to in Section 9-307 of the UCC) is located at and has been located at such address at all times since the date of formation of the Issuer, and the accounting books and records of the Issuer are maintained at its address determined in accordance with Section 8.03. The Issuer has not been known by any name other than “TAL ADVANTAGE II LLC”;

(j) Accounting and Tax Treatment. The Issuer will treat the transfer of the Transferred Assets to the Issuer by the Seller pursuant to this Agreement as a capital contribution (in part) and sale (in part) of such Transferred Assets by the Seller (which allocation between capital contribution and sale will be determined in accordance with Section 2.02 hereof) for financial reporting and accounting purposes. The Issuer will treat the transfer of the Transferred Assets to the Issuer as a transfer to an entity disregarded as separate from its owner for U.S. federal, state and local income tax purposes;

(k) Investment Company. The Issuer is not an “investment company” or a company controlled by an “investment company” within the meaning of the Investment Company Act of 1940, as amended;

(l) Separateness. The Issuer: (1) conducts its business in its own name, it being understood that the Issuer’s business will be managed by the Manager in accordance with the terms of the Management Agreement, (2) maintains its books and records separate from those of any other Person, (3) does not commingle its funds with any other Person (except for any commingling of Collections which may occur prior to the identification and segregation of such amounts in accordance with the terms of the Management Agreement), (4) maintains separate financial statements, showing its assets and liabilities separate and apart from those of any other Person, (5) holds itself out as a separate entity, and (6) observes all other organizational formalities;

(m) All Representations and Warranties True. All representations, warranties, certifications and statements made by Issuer in any certificate or document delivered in connection with the closing of the transactions contemplated by the Transaction Documents including all representations, warranties, certifications and statements made by the Issuer to Mayer Brown LLP in support of its opinions issued and delivered in connection with the issuance of the Notes and each of the factual assumptions contained in such opinions, to the extent compliance with such assumptions is in the control of the Issuer, are true and correct in all material respects as of the date made and do not omit to state a material fact necessary to make the statements contained therein not misleading as of such date;

(n) Financial Statements. The financial statements and books and records of the Issuer will reflect the separate existence of the Issuer and the Seller;

(o) No Subsidiaries. The Issuer has no Subsidiaries; and

 

 

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(p) Ordinary Course. The transactions contemplated by this Agreement are being consummated by the Issuer in good faith and in furtherance of the Issuer’s ordinary business purposes, with no contemplation of insolvency and with no intent to hinder, delay or defraud any of its present or future creditors.

SECTION 3.03 Breach of Representations and Warranties Regarding Certain Transferred Assets.

(a) Upon discovery by the Seller or the Issuer (or any of their respective successors or permitted assigns) of a breach of any of the Container Representations and Warranties made by the Seller on the related Transfer Date, the party (including any such successor or permitted assign) discovering such breach shall give prompt written notice to the other party (and the Issuer shall give prompt notice thereof to each of the Indenture Trustee and the Administrative Agent). If the Issuer (or its successors or permitted assigns) reasonably determines that such breach materially and adversely affects the interests of the Issuer or its successors and permitted assigns, then, unless the breach shall have been cured, or waived by the Issuer, within thirty (30) days after the receipt by the Seller of written notice of such breach from the Issuer (or its successors and permitte d assigns), the Seller shall, on or prior to such thirtieth (30th) day, repurchase the applicable Container (and all Related Assets with respect thereto) by paying the Warranty Purchase Amount to the Issuer for deposit into the Trust Account and, upon deposit of such payment in the Trust Account, such repurchase shall occur automatically without further action by any Person.

(b) The Issuer agrees that the obligation of the Seller to make the indemnification payments pursuant to this Section 3.03 shall constitute the sole remedy available against the Seller by the Issuer and its successors and permitted assigns for breach of a Container Representation or Warranty; provided, however, that nothing contained herein shall derogate from the Seller’s indemnification obligations set forth in Section 7.01 hereof for matters other than a breach of a Container Representation and Warranty.

SECTION 3.04 Substitute Container.

(a) The Seller will have the right (exercisable solely at its option) at any time to transfer to the Issuer one or more Containers and Related Assets (such Containers and Related Assets, collectively, a “Substitute Container”) in substitution for one or more Transferred Containers and Related Assets (such Transferred Containers and Related Assets, collectively, a “Predecessor Container”) if:

(i) the Predecessor Container is required to be repurchased pursuant to Section 3.03 hereof;

(ii) after giving effect to such substitution, no Asset Base Deficiency shall exist;

(iii) the Substitute Container, when considered with all other Eligible Containers, will satisfy the Concentration Limits; and

 

 

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(iv) the ownership of such containers by the Issuer will not result in an Early Amortization Event.

If more than one Substitute Container is being transferred on any date, the criteria set forth in clause (ii) above shall be determined on an aggregate basis.

(b) Any substitution pursuant to this Section 3.04 shall become effective upon compliance with the provisions of Section 2.02(b) hereof. Upon the effectiveness of such substitution, the Predecessor Container shall automatically be reconveyed by the Issuer to the Seller without further action by any Person.

ARTICLE IV

COVENANTS OF THE SELLER

SECTION 4.01 Seller Covenants. Seller hereby covenants and agrees with the Issuer (and its successors and assigns) as follows:

(a) Merger or Consolidation of, or Assumption of the Obligations of, the Seller. Notwithstanding anything in this Agreement to the contrary, any Person (i) into which the Seller may be merged or consolidated, (ii) resulting from any merger, conversion, or consolidation to which the Seller shall be party, or (iii) succeeding to the business of the Seller substantially as a whole, will be the successor to the Seller under this Agreement, without the execution or filing of any document or any further act on the part of any of the parties to this Agreement; provided, however, that the Seller shall not enter into any merger or consolidation unless (x) immediately after giving effect to such transaction, no Event of Default or Early Amortization Event shall result therefrom, (y) the Seller shall have delivered to the Issuer, an Officer’s Certificate and an Opinion of Counsel (which the Issuer shall forward to the Indenture Trustee and the Administrative Agent) each stating that such consolidation, merger, or succession complies with this Section 4.01 and that all conditions precedent, if any, provided for in this Agreement relating to such transaction have been complied with and (z) the Seller shall have delivered to the Issuer an Opinion of Counsel (which the Issuer shall forward to the Indenture Trustee and the Administrative Agent), either (1) stating that, in the opinion of such counsel, all financing statements or other documents of similar import, and amendments thereto have been executed (if applicable) and filed that are necessary fully to perfect the interest of the Issuer in the Transferred Assets, or (2) stating that, in the opinion of such counsel, no such action shall be necessary to perfect such interest.

(b) Limitation on Liability of the Seller and Others. The Seller and any director, officer, employee or agent of the Seller may rely in good faith on any document of any kind, prima facie properly executed and submitted by any Person respecting any matters arising under this Agreement; provided, however, that any such limitation does not affect the obligation of the Seller to accept reconveyance of certain Containers and the Related Assets and to pay the consideration therefor pursuant to Section 3.03. The Seller in its capacity as such shall not be under any obligation to appear in, prosecute, or defend any legal action that is not incidental to its obligations as the transferor of the Transferred Assets under this Agreement and that in its opin ion may involve it in any expense or liability.

 

 

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(c) Preservation of Name, etc. The Seller will not change its name, identity, location of chief executive office, jurisdiction of incorporation or corporate structure in any manner that would make ineffective any financing statement, continuation statement, or documents of similar import, filed by the Seller in accordance with Section 2.03 above unless (i) the Seller shall have given the Issuer at least thirty (30) days’ prior written notice thereof (which the Issuer promptly shall forward to the Indenture Trustee and the Administrative Agent), (ii) the Seller shall have filed any necessary financing statements or amendments thereof or documents of similar import necessary to continue the effectiveness of any financing statement or document of similar import referred to in Section 2.03 above and (iii) the Seller shall have delivered to the Issuer one or more Opinions of Counsel (which the Issuer promptly shall forward to the Indenture Trustee and the Administrative Agent), stating that, after giving effect to such change in name, identity, location of chief executive office, jurisdiction of incorporation or corporate structure: (A) the Seller and the Issuer will not, pursuant to applicable Insolvency Law, be substantively consolidated in the event of any Insolvency Proceeding by, or against, the Seller, (B) under applicable Insolvency Law, the transfers of Transferred Assets made in accordance with the terms of this Agreement will be treated as a “true sale” in the event of any Insolvency Proceeding by, or against, the Seller and (C) either (1) in the opinion of such counsel, all financing statements or other documents of similar import, and amendments thereto have been executed (if applicable) and filed that are necessary fully to perfect the interest of the Issuer in the Transferred Assets, or (2) stating that, in the opinion of such counsel, no such action shall be necessary to perfect such interest; provided that the opinions described in clause (A) and clause (B) shall not be required unless, as a result of the Seller’s change of chief executive office or jurisdiction of incorporation, the Seller’s chief executive office or the Seller’s jurisdiction of location is outside of the United States. The Seller shall observe all formalities necessary to maintain its corporate existence, subject to its rights under Section 4.01(a), and shall maintain all licenses, permits, charters and registration, the suspension of which or the failure to hold which, would reasonably be expected to result in a Material Adverse Change.

(d) Books and Records. The Seller will, at its own cost and expense, mark its books and records (which may include computerized records) to the effect that each Transferred Container and Related Assets have been transferred to the Issuer.

(e) Compliance with Law. The Seller will comply, in all material respects, with all acts, rules, regulations, orders, decrees and directions of any Governmental Authority except for any such noncompliance which would not reasonably be expected to result in a Material Adverse Change; provided, however, that the Seller may contest any act, rule, regulation, order, decree or direction in any reasonable manner which shall not materially and adversely affect the rights of the Issuer, the Noteholders, any Series Enhancers or the Indenture Trustee in the Transferred Assets.

(f) Conveyance of Transferred Assets; Security Interests. Except for the transfers and conveyances hereunder, the Seller will not pledge, assign or transfer to any other Person, or grant, create, incur or assume any Lien other than Permitted Encumbrances on, any Transferred Asset, or any interest therein and the Seller shall defend the right, title, and interest of the Issuer and its successors and assigns in, to, and under the Transferred Assets, against all claims of third parties claiming through or under the Seller.

 

 

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(g) Notification of Breach. The Seller will advise the Issuer promptly, in reasonable detail, upon discovery of the occurrence of any breach in any material respect by the Seller of any of its representations, warranties and covenants contained herein or in any other Transaction Documents (and the Issuer promptly shall forward such notice to the Administrative Agent and the Indenture Trustee).

(h) Further Assurances. The Seller will make, execute or endorse, acknowledge and file or deliver to the Issuer from time to time such UCC financing statements or documents of similar import (including any termination or continuation statements), schedules, confirmatory assignments, conveyances, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments and take such further steps relating to the Transferred Assets and other rights covered by this Agreement, as the Issuer or its successors and assigns may reasonably request. Any such requested UCC financing statement or document of similar import must be required pursuant to Applicable Law to fully preserve, maintain, and protect the interest of the Issuer under this Agreement in the Transferred Assets. The Seller shall comply with the terms and provisions of the UNIDROIT Convention or any other internationally recognized system for recording interests in or license against shipping containers at the time that such convention is adopted by the container leasing industry.

(i) Notice of Liens. The Seller shall notify the Issuer promptly after becoming aware of any Lien other than Permitted Encumbrances on the Transferred Assets (and the Issuer promptly shall forward such notice to the Administrative Agent and the Indenture Trustee).

(j) Transfer Taxes. The Seller shall pay any transfer taxes, if any, required to be paid in connection with the conveyance of the Transferred Assets by the Seller to the Issuer and acknowledges that the Issuer shall have no responsibility with respect thereto.

(k) No Bankruptcy Petition Against the Issuer. The Seller will not, prior to the date that is one year and one day after the payment in full of all amounts owing pursuant to the Indenture, this Agreement and the Transaction Documents, institute against the Issuer, or join any other Person in instituting against the Issuer, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceedings under the laws of any applicable jurisdiction. This subsection 4.01(k) shall survive the termination of this Agreement.

(l) ERISA. The Seller agrees to indemnify, defend and hold the Issuer harmless from and against any and all loss, liability, damage, judgment, claim, deficiency, or expense (including interest, penalties, reasonable and documented attorneys’ fees and amounts paid in settlement) to which the Issuer may become subject insofar as such loss, liability, damage, judgment, claim, deficiency or expense arises out of any Plan of the Seller.

(m) Issuer’s Ownership. The Seller shall take no action inconsistent with the Issuer’s ownership of the Managed Containers (except for such actions as are specifically authorized in the Management Agreement).

 

 

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(n) Access to Information; Notices. In the event that the Seller is no longer the Manager, the Seller shall continue to make available to the Issuer, the Indenture Trustee and each Series Enhancer its books and records concerning the Transferred Assets, subject to the terms and limitations set forth in Section 3.10.2 of the Management Agreement.

SECTION 4.02 Pledge of Transferred Assets. The Seller understands that the Issuer has pledged the Transferred Assets and its rights under this Agreement to the Indenture Trustee under the Indenture, and consents to such pledge. The Seller agrees that the Indenture Trustee may exercise the rights of the Issuer hereunder.

ARTICLE V

CONDITIONS PRECEDENT

SECTION 5.01 Conditions to Issuer Obligations. The obligations of the Issuer to acquire Transferred Assets on any Transfer Date occurring on or after the Closing Date shall be subject to the satisfaction of the following conditions (in addition to the procedures required by Section 2.02(b)):

(a) All representations and warranties of the Seller contained in this Agreement shall be true and correct in all material respects on such Transfer Date (including without limitation the Container Representations and Warranties);

(b) All written information concerning the Transferred Assets provided by the Seller to the Issuer shall be true and correct in all material respects;

(c) The Seller shall have materially performed all other obligations required to be performed by the Seller pursuant to the provisions of this Agreement and the other Transaction Documents to which it is a party other than any such obligation the failure to so perform shall have not materially and adversely affected the interests of the Issuer;

(d) All corporate and legal proceedings and all instruments in connection with the transactions contemplated by this Agreement shall be satisfactory in form and substance to the Issuer, and the Issuer shall have received from the Seller copies of all documents (including without limitation records of corporate proceedings) relevant to the transactions herein contemplated as the Issuer may reasonably have requested;

(e) No Event of Default, Early Amortization Event or Manager Default shall have occurred and then be continuing (other than any such Event of Default, Early Amortization Event or Manager Default that will be cured upon the consummation of such acquisition) or result from the acquisition of such Transferred Assets; and

(f) The Issuer has adequate means of financing available in order to complete the acquisition of such Transferred Assets.

Notwithstanding the foregoing conditions precedent, upon the making of a transfer of Transferred Assets hereunder, all of Issuer’s rights under this Agreement (and by operation of law) shall vest in Issuer, whether or not the conditions precedent to such transfer were in fact satisfied.

 

 

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SECTION 5.02 Conditions to the Seller’s Obligations. The obligations of the Seller to convey and contribute the Transferred Assets on any Transfer Date occurring on or after the Closing Date shall be subject to the satisfaction of the following conditions (in addition to the procedures required by Section 2.02 hereof):

(a) All representations and warranties of the Issuer contained in this Agreement shall be true and correct with the same effect as though such representations and warranties had been made on such date; and

(b) All corporate and legal proceedings and all instruments in connection with the transactions contemplated by this Agreement shall be satisfactory in form and substance to the Seller, and the Seller shall have received from the Issuer copies of all documents (including without limitation records of corporate proceedings) relevant to the transactions herein contemplated as the Seller may reasonably have requested.

SECTION 5.03 Waiver of Conditions. None of the conditions precedent set forth in Section 5.01 or Section 5.02 may be waived without the prior written consent of the Issuer and Indenture Trustee (acting at the direction of the Requisite Global Majority) in each such instance.

ARTICLE VI

TERMINATION

SECTION 6.01 Termination. The respective obligations and responsibilities of the Seller and the Issuer created by this Agreement shall not terminate prior to payment in full of all Outstanding Obligations.

SECTION 6.02 Effect of Termination. No termination or rejection or failure to assume the executory obligations of this Agreement in the bankruptcy of the Seller or the Issuer shall be deemed to impair or affect the obligations pertaining to any executed conveyance or executed obligations, including without limitation breaches of representations and warranties by the Seller or the Issuer occurring prior to the date of such termination. Without limiting the foregoing, prior to termination, neither the failure of the parties to execute and to deliver a Container Transfer Certificate pursuant to Section 2.02, nor the failure of the Issuer to pay in cash or kind the compensation therefor shall render such transfer or obligation executory, nor shall the continued duties of the parties pursuant to Article IV or Section 8.06 of thi s Agreement render an executed conveyance executory.

ARTICLE VII

INDEMNIFICATION PAYMENTS

SECTION 7.01 Indemnification. Subject to Section 3.03 hereof, the Seller agrees to indemnify and hold harmless the Issuer, its successors and assigns (which includes the third-party beneficiaries specified in Section 8.13) and their respective officers, directors, employees, counsel and agents (each, an “Indemnified Party”) against any and all liabilities, losses, damages, penalties, costs and expenses (including reasonable and documented out-of-pocket

 

 

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costs of defense and legal fees (of one counsel) but excluding (A) any special, consequential or punitive damages and (B) any damages on the basis of lost profits) which may be incurred or suffered by such Indemnified Party (except to the extent caused by the gross negligence, bad faith or willful misconduct of the Indemnified Party) as a result of (i) a breach by the Seller of any of its covenants and agreements set forth in this Agreement; (ii) any representation or warranty of the Seller proven to have been false or misleading in any material respect when made or deemed made in this Agreement; (iii) any information certified in any certificate or document delivered by the Seller pursuant hereto not being true in any material respect as of the date of such certificate or document (or, if earlier, the date set forth in such certificate or document); (iv) any personal injury or property damage claim or action arising out of or in connection with any of the Transferred Assets in connection with any act or omission prior to the related Transfer Date; (v) any defense, setoff or counterclaim arising out of any acts or omissions of the Seller with respect to any Transferred Assets transferred on or before the related Transfer Date; or (vi) any attempt by any Person to void, rescind or set aside any transfer of the Seller’s right, title and interest in the Transferred Assets to the Issuer as provided herein under statutory provisions or common law or equitable action, including any provision of the Bankruptcy Code or other insolvency law. The obligations of the Seller under this Section 7.01 shall survive the termination of this Agreement. It is expressly agreed and understood that this Section does not (and shall not be deemed to) create recourse to the Seller for the creditworthiness of any lessee or, for avoidance of doubt, for losses due to a lessee’s failure to make payments under a Lease or for the uncollectibility of the Leases.

SECTION 7.02 Procedure for Indemnification. Promptly after receipt by an Indemnified Party of notice of the assertion of a claim or the commencement of a proceeding by a third-party with respect to any matter referred to in Section 7.01 which could be the subject of an indemnification claim against the Seller hereunder, such Indemnified Party shall give written notice thereof to the Seller and thereafter shall keep the Seller reasonably informed with respect thereto; provided, however, that failure of an Indemnified Party to give the Seller written notice as provided herein shall not relieve the Seller of its obligations hereunder except to the extent that the Seller (x) incurs any incremental costs directly related to the delay in failing to provide such notice within a reasonable period of time or (y) is otherwise materia lly and adversely prejudiced by such failure. If any such proceeding (including any litigation, arbitration or similar proceeding) shall be brought against any Indemnified Party, the Seller shall be entitled to assume the defense thereof at the Seller’s expense with counsel chosen by the Seller and reasonably satisfactory to such Indemnified Party; provided, however, that any Indemnified Party may at its own expense retain separate counsel to participate in such defense. The Seller shall not be liable under this Article VII for any amount paid in settlement of such claims or proceedings without the consent of the Seller unless such consent is unreasonably withheld.

ARTICLE VIII

MISCELLANEOUS PROVISIONS

SECTION 8.01 Amendment. This Agreement may be amended from time to time by the Seller and the Issuer only with the prior written consent of the Indenture Trustee (acting at the direction of the Requisite Global Majority) and, if such amendment or modification would cause any of the events set forth in Section 1002(a)(i) through (vii) of the Indenture to

 

 

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occur, with the consent of the Persons set forth in Section 1002(a) of the Indenture); provided, that, if any such amendment or modification would (i) reduce the amount payable to such Series Enhancer, (ii) amend the relative priority of any such payment pursuant to Section 302 or 806 of the Indenture (other than to increase the priority thereof) or increase the amount of any applicable dollar limitations on amounts having a higher payment priority to such payments pursuant to Sections 302 or 806 of the Indenture or otherwise change such payments in a manner adverse to such Series Enhancer, (iii) change the date on which or the amount of which, or the place or payment where, or the coin or currency in which, such amount is paid to such Series Enhancer, (iv) increase or accelerate such Series Enhancer’s payment obligations under its Enhancement Agreement or otherwise materially and adversely affect the rights, interests or obligations of such Series Enhancer under this Agreement, or (v) modify provisions of any Transaction Document relating to requirements that the consent of such Series Enhancer be obtained, the approval of such Series Enhancer shall be required. The Issuer shall forward copies of any amendment to this Agreement to the Administrative Agent, each Series Enhancer (so long as such Series Enhancer is the Control Party for a Series of Outstanding Notes) and, if any Series of Notes Outstanding is then rated, the applicable Rating Agencies.

SECTION 8.02 Governing Law. THIS AGREEMENT AND ANY AMENDMENT HEREOF PURSUANT TO SECTION 8.01 SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW BUT WITHOUT REGARD TO CHOICE OF LAW PRINCIPLES) APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN AND THE OBLIGATIONS, RIGHTS, AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

SECTION 8.03 Notices. All demands, notices, and communications under this Agreement shall be in writing personally delivered, or sent by facsimile (with subsequent telephone confirmation of receipt thereof) or sent by internationally recognized overnight courier service, at the following address:

 

Seller:

TAL International Container Corporation
100 Manhattanville Road
Purchase, New York 10577-2135
Attn: Jeffrey Casucci, Vice President, Treasury and Credit
Fax: 914-697-2526

 

 

 

with a copy to:

 

 

 

TAL International Container Corporation

100 Manhattanville Road

Purchase, New York 10577-2135

Attn: Marc A. Pearlin, Vice President, General Counsel & Secretary

Fax: (914) 697-2526

 

 

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Issuer:

TAL Advantage II LLC
100 Manhattanville Road
Purchase, New York 10577-2135
Attn: Jeffrey Casucci

 

 

 

With a copy to:

 

 

 

TAL International Container Corporation
100 Manhattanville Road
Purchase, New York 10577-2135
Attn: Jeffrey Casucci, Vice President, Treasury and Credit
Fax: 914-697-2526

 

 

Indenture Trustee:

U.S. Bank National Association
60 Livingston Avenue
St. Paul, Minnesota 55107
Attention: TAL ADVANTAGE II, LLC, Variable Rate
Secured Notes, Series 2008-1
Fax: 651-495-8090

 

 

Administrative Agent:

Fortis Capital Corp.
520 Madison Avenue
New York, NY 10022
Attn: Gloria Beloti-Fields, Assistant Vice President
Fax: 212-340-5450

 

 

 

With a copy to:

 

 

 

Fortis Capital Corp.
Two Embarcadero Center
Suite 1330
San Francisco, CA 94111
Attn: Menno van Lacum
Fax: 415-283-3046

 

 

Hedge Counterparty:

shall be set forth in any related Hedge Agreement

or at such other address as shall be designated by such party in a written notice to the other parties. Notice shall be effective and deemed received (a) two days after being delivered to the courier service, if sent by courier, (b) upon receipt of confirmation of transmission, if sent by telecopy, or (c) when delivered, if delivered by hand. Any rights to notices conveyed to a Rating Agency pursuant to the terms of the Indenture with respect to any Series shall terminate immediately if such Rating Agency no longer has a rating outstanding with respect to such Series.

 

 

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Wherever notice or a report is required to be given or delivered to or from any party pursuant to this Agreement, a copy of such notice or report shall also be given or delivered by the Issuer to the Administrative Agent and the Indenture Trustee.

SECTION 8.04 Severability of Provisions. If any one or more of the covenants, agreements, provisions, or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions, or terms shall be deemed severable from the remaining covenants, agreements, provisions, or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement.

SECTION 8.05 Assignment. Notwithstanding anything to the contrary contained in this Agreement, this Agreement may not be assigned by the Seller except as provided in Section 4.01(a), without the prior written consent of the Issuer and the Indenture Trustee at the direction of the Requisite Global Majority and, except as provided in Section 4.02, this Agreement may not be assigned by the Issuer without the prior written consent of the Requisite Global Majority. Whether or not expressly stated, all representations, warranties, covenants and agreements of the Seller and the Issuer in this Agreement, or in any document delivered by any of them in connection with this Agreement, shall be for the benefit of, and (in the case of rights of the Issuer) shall be exercisable by, the Indenture Trustee or by any other representative of the Requisite Global Majority.

SECTION 8.06 Further Assurances. Each of the Seller and the Issuer agrees to do such further acts and things and to execute and deliver such additional assignments, agreements, powers and instruments as are reasonably required to carry into effect the purposes of this Agreement.

SECTION 8.07 Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Issuer or the Seller, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise hereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exhaustive of any rights, remedies, powers and privilege provided by law.

SECTION 8.08 Counterparts. This Agreement may be executed in two or more counterparts (and by different parties on separate counterparts), each of which shall be an original, but all of which shall constitute one and the same instrument. Delivery of an executed counterpart of this Agreement by facsimile or by electronic means shall be equally effective as of the delivery of an originally executed counterpart.

SECTION 8.09 Binding. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns.

 

 

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SECTION 8.10 Merger and Integration. Except as specifically stated otherwise herein, this Agreement sets forth the entire understanding of the parties relating to the subject matter hereof, and all prior understandings, written or oral, are superseded by this Agreement.

SECTION 8.11 Headings. The headings herein are for purposes of reference only and shall not otherwise affect the meaning or interpretation of any provision hereof.

SECTION 8.12 Schedules and Exhibits. The schedules and exhibits attached hereto and referred to herein shall constitute a part of this Agreement and are incorporated into this Agreement for all purposes.

SECTION 8.13 Intended Third Party Beneficiaries. Each of the Administrative Agent, the Indenture Trustee, each Series Enhancer and the Requisite Global Majority are express third party beneficiaries of this Agreement and, as such, shall have full power and authority to enforce the provisions of this Agreement against the parties hereto. Except as set forth in the immediately preceding sentence, this Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

SECTION 8.14 Consent to Jurisdiction. Any legal suit, action or proceeding against the Seller or the Issuer arising out of or relating to this Agreement, or any transaction contemplated hereby or thereby, may be instituted in any federal or state court in the County of New York, State of New York and each of the Seller and the Issuer hereby waives any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding, and, solely for the purposes of enforcing this Agreement, the Seller and the Issuer each hereby irrevocably submits to the jurisdiction of any such court in any such suit, action or proceeding.

SECTION 8.15 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, AS AGAINST THE OTHER PARTY HERETO, ANY RIGHTS IT MAY HAVE TO A JURY TRIAL IN RESPECT OF ANY CIVIL ACTION OR PROCEEDING (WHETHER ARISING IN CONTRACT OR TORT OR OTHERWISE), INCLUDING ANY COUNTERCLAIM, ARISING UNDER OR RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, INCLUDING IN RESPECT OF THE NEGOTIATION, ADMINISTRATION OR ENFORCEMENT HEREOF OR THEREOF.

SECTION 8.16 No Claim. Indemnity payments payable by the Issuer to the Seller, the Indenture Trustee and Manager hereunder shall be non-recourse to the Issuer and shall not constitute a claim (as defined in Section 101(5) of the Bankruptcy Code) against the Issuer or the Collateral in the event such amounts are not paid in accordance with Section 302 or 806 of the Indenture. Each of the Seller, Indenture Trustee and Manager hereby subordinates its claims hereunder to all claims which have priority in payment under Section 302 or 806 of the Indenture, and further agrees that any such claims shall only be payable at the times and in the amounts for which funds are available for such purpose pursuant to Section 302 or 806 of the Indenture.

 

 

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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

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IN WITNESS WHEREOF, the Seller and the Issuer have caused this Agreement to be duly executed as of the day and year first above written.

 

 

 

 

TAL INTERNATIONAL CONTAINER
CORPORATION

       

 

By: 

 

 

 

Name:

 

 

 

Title:

 

 

 



 

 

 

TAL ADVANTAGE II LLC,

 

 

 

 

 

 

By:

TAL International Container Corporation, its Manager

       

 

By: 

 

 

 

Name:

 

 

 

Title:

 

 

 


EX-10.56 6 file6.htm SERIES 2008-1 NOTE PURCHASE AGRMT., DATED 3-27-08

 

SERIES 2008-1 NOTE PURCHASE AGREEMENT

DATED AS OF MARCH 27, 2008

BETWEEN

TAL ADVANTAGE II LLC,

AS ISSUER,

THE NOTEHOLDERS FROM TIME TO TIME PARTY HERETO

AND

THE OTHER FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTY HERETO

 

 

TAL ADVANTAGE II LLC SERIES 2008-1, FLOATING RATE SECURED NOTES

 

 

 

 

 



TABLE OF CONTENTS

 

 

 

 

 

Page No.

 

 

ARTICLE I

 

 

 

 

 

 

 

 

 

DEFINITIONS

 

 

 

 

 

 

 

Section 1.1

 

Certain Defined Terms

 

1

Section 1.2

 

Other Terms

 

3

Section 1.3

 

Computation of Time Periods

 

3

Section 1.4

 

Statutory References

 

3

 

 

 

 

 

 

 

ARTICLE II

 

 

 

 

 

 

 

 

 

PURCHASE OF THE NOTES

 

 

 

 

 

 

 

Section 2.1

 

Sale and Delivery of the Notes

 

4

Section 2.2

 

Acceptance and Custody of Notes

 

5

Section 2.3

 

Increase/Reduction of the Series 2008-1 Note Existing Commitment

 

5

Section 2.4

 

Payments, Computations, Etc.

 

6

 

 

 

 

 

 

 

ARTICLE III

 

 

 

 

 

 

 

 

 

CONDITIONS OF PURCHASE

 

 

 

 

 

 

 

Section 3.1

 

Conditions Precedent to Initial Purchase

 

7

Section 3.2

 

Conditions Precedent to Each Series 2008-1 Advance

 

7

 

 

 

 

 

 

 

ARTICLE IV

 

 

 

 

 

 

 

 

 

REPRESENTATIONS AND WARRANTIES

 

 

 

 

 

 

 

Section 4.1

 

Representations and Warranties of the Issuer

 

8

Section 4.2

 

Representations, Warranties and Agreements of the Purchasers

 

8

 

 

 

 

 

 

 

ARTICLE V

 

 

 

 

 

 

 

 

 

GENERAL COVENANTS

 

 

 

 

 

 

 

Section 5.1

 

General Covenants of the Issuer

 

10

 

 

 

 

 

 

 

ARTICLE VI

 

 

 

 

 

 

 

 

 

INDEMNIFICATION

 

 

 

 

 

 

 

Section 6.1

 

Indemnities by the Issuer

 

11

 

 

-i-

 



 

 

 

ARTICLE VII

 

 

 

 

 

 

 

 

 

THE DEAL AGENT

 

 

 

 

 

 

 

Section 7.1

 

Authorization and Securities Action

 

13

Section 7.2

 

Delegation of Duties

 

13

Section 7.3

 

Exculpatory Provisions

 

13

Section 7.4

 

Reliance

 

14

Section 7.5

 

Non-Reliance on Deal Agents and Other Purchasers

 

14

Section 7.6

 

Deal Agent in its Individual Capacity

 

14

Section 7.7

 

Successor Deal Agent

 

14

 

 

 

 

 

 

 

ARTICLE VIII

 

 

 

 

 

 

 

 

 

MISCELLANEOUS

 

 

 

 

 

 

 

Section 8.1

 

Amendments and Waivers

 

16

Section 8.2

 

Notices, Etc.

 

16

Section 8.3

 

No Waiver; Remedies

 

17

Section 8.4

 

Binding Effect

 

17

Section 8.5

 

Term of this Agreement

 

17

Section 8.6

 

GOVERNING LAW

 

17

Section 8.7

 

WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION

 

17

Section 8.8

 

Inspection Rights, Costs, Expenses and Taxes

 

18

Section 8.9

 

No Proceedings

 

19

Section 8.10

 

Recourse Against Certain Parties

 

20

Section 8.11

 

Ratable Payments

 

21

Section 8.12

 

Confidentiality

 

21

Section 8.13

 

Execution in Counterparts; Severability; Integration

 

21

 

 

 

 

 

SCHEDULE 1

 

CONDITIONS PRECEDENT TO INITIAL PURCHASE

 

 

SCHEDULE 2

 

PURCHASE LIMITS

 

 

EXHIBIT A

 

FORM OF COMPLIANCE CERTIFICATE AND FUNDING NOTICE

 

 

EXHIBIT B

 

FORM OF RELATED GROUP ADDITION NOTICE

 

 

EXHIBIT C

 

FORM OF ASSIGNMENT AND ACCEPTANCE

 

 

EXHIBIT D

 

FORM OF INCREASE LETTER

 

 

 

 

-ii-

 



 

This SERIES 2008-1 NOTE PURCHASE AGREEMENT (as amended, modified and supplemented from time to time in accordance with its terms, this “Agreement”), dated as of March 27, 2008, is entered into by and among:

 

(1)

TAL ADVANTAGE II LLC, a limited liability company organized under the laws of the State of Delaware (together with its successors and assigns, the “Issuer”);

 

(2)

The Purchasers from time to time party hereto;

 

(3)

The financial institutions made party to this Agreement from time to time pursuant to a Related Group Addition Notice and listed under the heading “The Deal Agents” together with their respective successors and assigns (the “Deal Agents”);

 

(4)

The Liquidity Providers from time to time party hereto; and

 

(5)

The Liquidity Agents from time to time party hereto.

In consideration of the premises and mutual covenants herein contained, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Certain Defined Terms.

(1) Certain capitalized terms used throughout this Agreement are defined above or in this Section 1.1. In addition, capitalized terms used but not defined herein have the meanings given to such terms in the Appendix A to the Indenture, dated as of March 27, 2008 (as amended, restated or supplemented from time to time, the “Indenture”), by and between the Issuer and U.S. Bank National Association, as indenture trustee (the “Indenture Trustee”) or, if such terms are not defined therein, such terms shall have the meanings given to such terms in the Series 2008-1 Supplement, dated as of March 27, 2008 (as amended, restated or supplemented from time to time, the “Supplement”), by and between the Issuer and the Indenture Trustee.

(2) As used in this Agreement and its exhibits, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

Assignment and Acceptance”: Any properly completed agreement substantially in the form of Exhibit C hereto.

Closing Date”: March 27, 2008.

 

 

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Collection Date”: The date on which the last to occur of the following events occurs: (i) the Aggregate Series 2008-1 Principal Balance has been reduced to zero, (ii) the Purchasers have received all amounts of interest due in respect of the Notes and other amounts due to the Purchasers in connection with this Agreement, the Indenture and the Supplement and (iii) the Deal Agents have received all amounts due to them in connection with this Agreement.

Commercial Paper”: On any day, any commercial paper note issued by, or on behalf of, a CP Purchaser for the purpose of financing or maintaining its investment in the Notes, including all such commercial paper notes so issued to re-finance matured commercial paper notes issued by, or on behalf of, such CP Purchaser that were originally issued to finance or maintain such CP Purchaser’s investment in the Notes.

Conversion Date”: This term shall have the meaning set forth in the Supplement.

CP Purchaser”: Any Purchaser which is designated as a CP Purchaser on the signature pages hereto or in an Assignment and Acceptance or a Related Group Addition Notice pursuant to which it became a party to this Agreement.

Deal Agent’s Account”: With respect to each Deal Agent, the account notified by the Deal Agent to the Issuer as the “Deal Agent’s Account”.

Increase Notice”: Any properly completed notice substantially in the form of Exhibit D hereto.

Indemnified Amounts”: This term shall have the meaning set forth in Section 6.1 hereof.

Indemnified Party”: This term shall have the meaning set forth in Section 6.1 hereof.

Liquidity Agent”: With respect to any CP Purchaser, the Person acting as agent for its related Liquidity Providers pursuant to a properly completed Related Group Addition Notice.

Liquidity Agreement”: Any or all, as the context may require, of each liquidity agreement or liquidity purchase agreement (however denominated) among a Liquidity Agent, one or more related Liquidity Providers, the related CP Purchaser and any other parties thereto, in each case as the same may be amended, supplemented, restated, replaced or otherwise modified from time to time in accordance with its terms.

Liquidity Provider”: Each liquidity bank that, pursuant to the terms of a Liquidity Agreement, agrees to fund Series 2008-1 Advances pursuant to a properly completed Related Group Addition Notice or an Assignment and Acceptance.

Note”: Any Series 2008-1 Note.

Percentage”: With respect to any Purchaser as of any date of determination, the percentage equivalent of a fraction, the numerator of which is equal to the Purchaser’s Purchase Limit and the denominator of which is equal to the aggregate Purchase Limit for all Purchasers.

Purchase”: The initial purchase by a Purchaser of the Notes from the Issuer and the payment of any additional Series 2008-1 Advance by a Purchaser.

 

 

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Purchase Limit”: The maximum amount of Series 2008-1 Advances that a Purchaser that is not a CP Purchaser shall, or a CP Purchaser may, in its sole discretion, elect to (or, if the CP Purchaser elects, in its sole discretion, not to fund such Series 2008-1 Advance, the Liquidity Provider(s) shall) fund to the Issuer hereunder, as set forth on Schedule 2 hereto (as such Schedule 2 shall be deemed to be amended by a properly executed Related Group Addition Notice, Assignment and Acceptance or Increase Notice).

Purchaser”: Any CP Purchaser, any Liquidity Provider and any other Person that may agree from time to time, pursuant to the pertinent Assignment and Acceptance or Related Group Addition Notice, to fund a Series 2008-1 Advance hereunder and their successors and assigns. The initial Purchaser hereunder shall be Fortis Capital Corp.

Rating Agency”: Any rating agency that has been requested to issue a rating with respect to the Commercial Paper issued by, or on behalf of, a CP Purchaser.

Related Group”: For each CP Purchaser, such CP Purchaser and its related Deal Agent, Liquidity Agent and Liquidity Providers and the term “related” shall have the correlative meaning. Any Purchaser that has no CP Purchaser affiliated with it for purposes of this Agreement shall be treated as its own Related Group.

Related Group Addition Notice”: Any properly completed notice substantially in the form of Exhibit B hereto.

Section 1.2 Other Terms.

All accounting terms not defined herein shall have the respective meanings given to them under GAAP consistently applied. To the extent that the definitions of accounting terms in this Agreement are inconsistent with the meanings of such terms under GAAP or regulatory principles, the definitions contained in this Agreement or in any certificate or other document shall control.

Section 1.3 Computation of Time Periods.

Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each means “to but excluding.”

Section 1.4 Statutory References.

References in this Agreement to any section of the UCC shall mean, on or after the effective date of adoption of any revision to the UCC in the applicable jurisdiction, such revised or successor section thereto.

 

 

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ARTICLE II

PURCHASE OF THE NOTES

Section 2.1 Sale and Delivery of the Notes.

(a) On the basis of the representations and warranties and subject to the terms and conditions set forth herein and in the other Transaction Documents, the Issuer agrees to deliver on the Closing Date, to each of the Persons set forth on Schedule 2, a Note with a maximum aggregate principal amount of up to the amount set forth opposite such Person’s name on Schedule 2. The Notes shall be duly executed by the Issuer, duly authenticated by the Indenture Trustee and registered in the name of each of the Persons set forth on Schedule 2 or its nominee. In connection with any transfer of a Note made in accordance with Section 202 of the Supplement (including the related Series 2008-1 Note Existing Commitment), the Issuer agrees to deliver a Note in the name of such transferee or its nominee on behalf of such transferee and its Related Group in the maximum aggregate principal amount determined pursuant to the related Assignment and Acceptance. Any such assignment of a Series 2008-1 Note and all or a portion of the Series 2008-1 Existing Commitment of a Series 2008-1 Noteholder may be effected by the execution and delivery to the Issuer and the Indenture Trustee of an Assignment and Assumption Agreement and a Related Group Addition Notice. The actual outstanding principal balance of the Notes will be increased and decreased from time to time in accordance with the terms hereof, the Supplement and the Indenture.

(b) The Issuer may request (each such request to be substantially in the form of Exhibit A hereto, a “Funding Notice”), to the Deal Agents by delivery of a Funding Notice to the Administrative Agent that the Purchasers make a Series 2008-1 Advance, each such Funding Notice to be irrevocable when given and shall be on the terms and conditions set forth herein and in Section 205(b) of the Supplement.

(c) The Issuer may, within 60 days, but no later than 45 days (or such shorter period as may be approved by the parties hereto), prior to the then current Conversion Date, by written notice to each Deal Agent, with a copy to the Indenture Trustee and the Series Enhancer, if any, for Series 2008-1, request the Purchasers to extend the Conversion Date for an additional period of up to 364 days from the then current Conversion Date. Each of the Purchasers shall make a determination, in its sole discretion and after a full credit review, within 30 days of its receipt of the Issuer’s request, as to whether or not it will agree to extend the Conversion Date; provided, however, that the failure of any Purchaser to make a timely response to the Issuer’s request for extension of the Conversion Date shall be deemed to constitute a refusal by such Purchasers to extend the Conversion Date. Any such renewal shall become effective only upon written confirmation to the Issuer by each Deal Agent on behalf of the consenting Purchaser of its agreement to so renew, upon receipt by each Deal Agent of any fees required to be paid in connection with such renewal, and receipt by the Issuer and such Deal Agent of the written consent of the Series Enhancer for Series 2008-1, if any, to such extension of the Conversion Date.

 

 

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Section 2.2 Acceptance and Custody of Notes.

On the Closing Date, each Deal Agent shall take delivery of the applicable Note and maintain custody thereof on behalf of its related Purchaser.

Section 2.3 Increase/Reduction of the Series 2008-1 Note Existing Commitment.

(a) The Issuer may, upon at least 30 days’ written notice to each Purchaser and Deal Agent, with a copy to the Indenture Trustee and the Series Enhancer, terminate in whole, or reduce in part, the then unused Series 2008-1 Note Existing Commitment of each Series 2008-1 Noteholder; provided, however, that each partial reduction of the Series 2008-1 Note Existing Commitment shall be in amounts equal to $10,000,000 or an integral multiple of $1,000,000 in excess thereof and shall be allocated pro rata among the Notes (based on the then current maximum principal amount of each such Note). Each notice of reduction or termination pursuant to this Section 2.3 shall be irrevocable. Notwithstanding the foregoing, the Issuer may on any Business Day reduce to zero and terminate the Series 2008-1 Note Existing Commitment in connection with a refinancing of the Notes upon (a) at least five (5) Business Days prior written notice to each Deal Agent, with a copy to the Indenture Trustee and the Series Enhancer, if any, specifying the proposed Payment Date of such termination, and (b) payment in full of (i) the principal of, and interest on, the Notes and (ii) Breakage Costs, if any, and all other Outstanding Obligations of the Issuer under the Supplement and this Agreement.

(b) The Issuer may, by means of a letter delivered to Administrative Agent and the Indenture Trustee on not more than five (5) occasions prior to the Conversion Date, request that the aggregate Series 2008-1 Note Existing Commitments be increased by an aggregate amount not to exceed One Hundred Twenty Five Million Dollars ($125,000,000), by (a) increasing the commitment of one or more then existing Series 2008-1 Noteholders that have agreed to such increase and/or (b) by issuing additional Series 2008-1 Notes to adding one or more commercial banks, finance companies or other Persons acceptable to the Issuer (each an “Additional Series 2008-1 Noteholder”) with a Series 2008-1 Note Existing Commitment in an amount agreed to by any such Additional Series 2008-1 Noteholder; provided that until such time as the Series 2008-1 Note Existing Commitment of Fortis shall have been reduced to Seventy Five Million Dollars ($75,000,000), any incremental additional commitments that may become available to the Issuer pursuant to this Section 205(d) shall be used to decrease the commitment of Fortis. Any such increase in the aggregate Series 2008-1 Note Existing Commitment made in accordance with this Section 205(d) shall be effective three Business Days after the date on which Issuer has delivered to the Administrative Agent and the Indenture Trustee the Increase Notice (as such term is defined herein) (in the case of an increase in the Commitments of an existing Series 2008-1 Noteholder) or Related Group Addition Notice (as such term is defined herein) (in the case of the addition of an Additional Series 2008-1 Noteholders). If the Issuer pays or agrees to pay to any Series 2008-1 Noteholder or Additional Series 2008-1 Noteholder, any increased Commitment Fee and/or Applicable Margin, then the terms of this Supplement shall automatically be amended with the effect that the amount of such increased Commitment Fee and/or Applicable Margin shall be payable on a prospective basis to all then existing Series 2008-1 Noteholders.

 

 

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Section 2.4 Payments, Computations, Etc.

(a) Unless otherwise expressly provided herein, in the Indenture or the Supplement, all amounts to be paid or deposited by the Issuer hereunder to a Deal Agent or a Related Group shall be paid or deposited in accordance with the terms hereof no later than 11:00 a.m. (New York time) on the day when due in lawful money of the United States in immediately available funds to the applicable Deal Agent’s Account. The Issuer shall, to the extent permitted by law, pay to the Series 2008-1 Noteholders interest on all amounts not paid or deposited when due on the Notes at the Default Rate, payable on demand, but only to the extent provided in Sections 203(b) and 203(c) of the Supplement. Such interest shall be retained by the Deal Agents except, in each case, to the extent that such failure to make a timely payment or deposit has continued beyond the date for distribution by the Deal Agents of such overdue amount to the related Series 2008-1 Noteholders, in which case such interest accruing after such date shall be for the account of, and distributed by the Deal Agents to, such related Series 2008-1 Noteholders. All computations of interest and other fees hereunder shall be made on the basis of a year of 360 days (or, in the case of interest calculated at the Base Rate, 365 or 366 days, as applicable) for the actual number of days (including the first but excluding the last day) elapsed.

(b) Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next Business Day, and such extension of time shall in such case be included in the computation of payment of any interest or any fee payable hereunder, as the case may be.

 

 

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ARTICLE III

CONDITIONS OF PURCHASE

Section 3.1 Conditions Precedent to Initial Purchase.

The initial Purchase hereunder is subject to the satisfaction, on or before the date of such purchase, as determined by the initial Purchaser, of each condition precedent listed in Schedule 1 hereto and Section 501 of the Supplement.

Section 3.2 Conditions Precedent to Each Series 2008-1 Advance.

Each Series 2008-1 Advance (including the initial Series 2008-1 Advance) from the Issuer shall be subject to the satisfaction of the conditions precedent listed in Section 502 of the Supplement.

 

 

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES

Section 4.1 Representations and Warranties of the Issuer.

The Issuer represents and warrants to the Deal Agents and the Purchasers as follows:

(1) Information. No information, exhibit, financial statement, document, book, record or report furnished or to be furnished by it to a Deal Agent or a Purchaser in writing (i) is or will be inaccurate in any material respect as of the date it is or shall be dated or (except as otherwise disclosed to the recipient thereof at the time of delivery or thereafter) as of the date so furnished and (ii) no such document contains or will contain any material misstatement of fact or omits or shall omit to state a material fact necessary to make the statements contained therein not misleading in light of the statements made therein, in each case as of the date it is or shall be dated or (except as otherwise disclosed to the recipient thereof at the time of delivery or thereafter) as of the date so furnished.

(2) Accuracy of Representations and Warranties. Each representation and warranty made by it contained herein or in any certificate or other document furnished by it pursuant hereto or to any Series 2008-1 Transaction Document or in connection herewith or therewith is true and correct in all material respects as of the date made by it.

(3) Offer and Sale. Neither the Issuer nor any Person acting on its behalf has offered to sell the Notes by any form of general solicitation or general advertising. The Issuer has not offered or sold the Notes or other similar security in any manner that would render the issuance and sale of the Notes a violation of the Securities Act, require registration pursuant thereto, nor has it authorized nor will it authorize any person to act in such manner.

Section 4.2 Representations, Warranties and Agreements of the Purchasers.

Each Purchaser hereby represents and warrants to, and agrees with, the Issuer that:

(1) The Purchaser understands that the Note purchased by it has not been registered under the Securities Act or the securities laws of any State and, if the Note is not then registered under applicable federal and State securities law (which registration the Issuer is not obligated to effect), it will not offer to sell, transfer or otherwise dispose of the Note or any portion thereof except in a transaction which is exempt from such registration.

(2) The Purchaser is acquiring the Note for its own account, and not as a nominee for any other Person, and the Purchaser is not acquiring the Note with a view to or for sale or transfer in connection with any distribution of the Note under the Securities Act, but subject, nevertheless, to the condition that all dispositions of its property shall at all times be within its control.

(3) The Purchaser is an institutional “accredited investor” of the type described in clause (1) of Section 501(a) of Regulation D under the Securities Act.

 

 

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(4) The Purchaser is not acquiring the Note with the assets of a Benefit Plan Investor.

(5) Neither the Purchaser nor any Person acting on its behalf has offered to sell the Note by any form of general solicitation or general advertising. The Purchaser has not offered the Note in any manner that would render the issuance and sale of the Note a violation of the Securities Act, or require registration pursuant thereto, nor has it authorized nor will it authorize any person to act in such manner.

 

 

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ARTICLE V

GENERAL COVENANTS

Section 5.1 General Covenants of the Issuer.

The Issuer hereby covenants with each Deal Agent and the Purchasers as follows:

(1) The Issuer hereby agrees to notify the Deal Agents and the Series Enhancer, if any, for Series 2008-1 as soon as possible, and in any event within five (5) days after the earlier to occur of (i) actual knowledge and (ii) notice to the Issuer, of (a) the occurrence of any Event of Default, (b) the occurrence of any Early Amortization Event, (c) any fact, condition or event which, with the giving of notice or the passage of time or both, could become an Event of Default, (d) any fact, condition or event which, with the giving of notice or the passage of time or both, could become an Early Amortization Event, (e) the failure of the Issuer to observe any of its material undertakings under the Series 2008-1 Transaction Documents or (f) any change in the status or condition of the Issuer or the Manager that would reasonably be expected to adversely affect the Issuer’s or the Manager’s ability to perform its obligations under the Series 2008-1 Transaction Documents.

(2) The Issuer agrees not to sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the Securities Act) that would be integrated with the sale of the Note in a manner that would require the registration under the Securities Act of the sale to any Purchaser of any Note.

(3) Any notice of any voluntary Prepayment of the Notes made in accordance with the provisions of Section 204(b) of the Supplement shall be irrevocable when given.

 

 

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ARTICLE VI

INDEMNIFICATION

Section 6.1 Indemnities by the Issuer.

Without limiting any other rights which the Deal Agents, the Liquidity Agents, the Purchasers or any of their respective Affiliates, officers, directors, employees and/or agents thereof or their respective successors and assigns may have hereunder or under applicable law, the Issuer hereby agrees to indemnify each of the Deal Agents, the Liquidity Agents, the Purchasers and each of their respective officers, directors, employees, counsel and agents thereof (each, an “Indemnified Party”) from and against any and all liabilities, losses, damages, costs and expenses (including reasonable and documented, out-of-pocket costs of defense and legal fees and expenses) which may be incurred or suffered by such Indemnified Party, except to the extent caused by the gross negligence or willful misconduct of the Indemnified Party (all of the foregoing being collectively referred to as “Indemnified Amounts”) as a result of claims, actions, suits or judgments asserted or imposed against an Indemnified Party and arising out of this Agreement and the Transaction Documents or the transactions contemplated thereby or the ownership or security interest in any Transferred Assets as contemplated herein including, without limitation, as a result of (i) an action or inaction by the Issuer that is contrary to the terms of this Agreement or any other Transaction Document to which it is a party, (ii) a breach by the Issuer of any of its covenants and agreements set forth in this Agreement or any other Transaction Document to which it is a party, (iii) any information provided by the Issuer in writing being untrue in any material respect as of the date provided, and (iv) any representation or warranty of the Issuer proven to have been false or misleading in any material respect when made or deemed made in this Agreement or in any Transaction Document.

Promptly after receipt by an Indemnified Party of notice of the assertion of a claim or the commencement of a proceeding by a third party with respect to any matter referred to in this Section 6.1 which could be the subject of an indemnification claim against the Issuer hereunder, such Indemnified Party shall give written notice thereof to the Issuer and thereafter shall keep the Issuer reasonably informed with respect thereto; provided, however, that failure of an Indemnified Party to give the Issuer written notice as provided herein shall not relieve the Issuer of its obligations hereunder unless the Issuer is materially and adversely prejudiced thereby and, in any such instance, the indemnification obligation of the Issuer to such Indemnified Party shall only be reduced by the amount of incremental costs or losses to the Issuer related to the failure to deliver such notice in a timely manner. If any such proceeding (including any litigation, arbitration or similar proceeding) shall be brought against any Indemnified Party, the Issuer or the Manager shall be entitled to assume the defense thereof at the Issuer’s or the Manager’s expense with counsel chosen by the Issuer or the Manager and reasonably satisfactory to the Indemnified Party; provided, however, that any Indemnified Party may at its own expense retain separate counsel to participate in such defense. The Issuer and the Manager shall not be liable under this Article VI for any amount paid in settlement of such claims or proceedings without the consent of the Issuer or the Manager unless such consent is unreasonably withheld. All Indemnified Amounts shall be paid to the appropriate Indemnified Party within 30 days after such Indemnified Party’s written demand for such amount.

 

 

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Notwithstanding anything to the contrary, the Issuer’s obligations to make payments under this Section 6.1 shall be limited solely to funds available from time to time for such purpose pursuant to Section 302 or Section 806 of the Indenture and to the extent they are not so paid, such obligations shall not constitute a “claim” (as defined in Section 101(5) of the Bankruptcy Code) against the Issuer.

 

 

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ARTICLE VII

THE DEAL AGENT

Section 7.1 Authorization and Securities Action.

Each Purchaser hereby designates and appoints its related Deal Agent as a Deal Agent hereunder, and authorizes its related Deal Agent to take such actions as agent on its behalf and to exercise such powers as are delegated to the Deal Agents by the terms of this Agreement together with such powers as are reasonably incidental thereto. Each Purchaser and each Deal Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Purchaser or any other Deal Agent, and no implied covenants, functions, responsibilities, duties, obligations or liabilities on the part of a Purchaser or a Deal Agent shall be read into this Agreement or otherwise exist for any Purchaser or any Deal Agent. In performing its functions and duties hereunder, each Deal Agent shall act solely as agent for its related Purchaser and does not assume nor shall be deemed to have assumed any obligation or relationship of trust or agency with or for the Issuer or any of its successors or assigns. The Deal Agents shall not be required to take any action which exposes the Deal Agents to personal liability or which is contrary to this Agreement, any other Series 2008-1 Transaction Document or applicable law. The appointment and authority of the Deal Agents hereunder shall terminate on the Collection Date.

Section 7.2 Delegation of Duties.

Each Deal Agent may execute any of its duties under this Agreement by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. Each Deal Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.

Section 7.3 Exculpatory Provisions.

The Deal Agents and any of their respective directors, officers, agents or employees shall not be (i) liable for any action lawfully taken or omitted to be taken by it or them under or in connection with this Agreement (except for its, their or such Person’s own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Purchasers for any recitals, statements, representations or warranties made by the Issuer contained in this Agreement or in any certificate, report, statement or other document referred to or provided for in, or received under or in connection with, this Agreement or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other document furnished in connection herewith, or for any failure of the Issuer to perform its obligations hereunder, or for the satisfaction of any condition specified in Article III hereof. The Deal Agents shall not be under any obligation to any Purchaser to ascertain or to inquire as to the observance or performance of any of the agreements or covenants contained in, or conditions of, this Agreement, or to inspect the properties, books or records of the Issuer. No Deal Agent shall be deemed to have knowledge of any Event of Default or Early Amortization Event unless such Deal Agent has received written notice to such effect from the Issuer, the Indenture Trustee or a Purchaser.

 

 

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Section 7.4 Reliance.

The Deal Agents shall in all cases be entitled to rely, and shall be fully protected in relying, upon any document or conversation believed by them to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Issuer), independent accountants and other experts selected by the Deal Agents. The Deal Agents shall in all cases be fully justified in failing or refusing to take any action under this Agreement or any other document furnished in connection herewith unless it shall first receive such advice or concurrence of the related Purchasers, as it deems appropriate or it shall first be indemnified to its satisfaction by the Purchasers, provided that unless and until the Deal Agents shall have received such advice, the Deal Agents may take or refrain from taking any action as such Deal Agents shall deem advisable and in the best interests of the related Purchasers. The Deal Agents shall in all cases be fully protected in acting, or refraining from acting, in accordance with a request of the related Purchasers, and such request and any action taken or failure to act pursuant thereto shall be binding upon all Purchasers.

Section 7.5 Non-Reliance on Deal Agents and Other Purchasers.

Each Purchaser expressly acknowledges that none of the Deal Agents or any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by the Deal Agents hereafter taken, including, without limitation, any review of the affairs of the Issuer, shall be deemed to constitute any representation or warranty by the Deal Agents. Each Purchaser represents and warrants to the Deal Agents that it has made and will make, independently and without reliance upon the Deal Agents or any other Purchaser and based on such documents and information as it has deemed appropriate, its own appraisal of and investigation into the business, operations, property, prospects, financial and other conditions and creditworthiness of the Issuer and the Manager and made its own decision to enter into this Agreement.

Section 7.6 Deal Agent in its Individual Capacity.

Any of the Deal Agents and their Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Issuer or any Affiliate of the Issuer as though the Deal Agents were not the Deal Agents hereunder. With respect to the acquisition of the Notes pursuant to this Agreement, each of the Deal Agents and their Affiliates shall have the same rights and powers under this Agreement as any Purchaser and may exercise the same as though it were not a Deal Agent and the terms “Purchaser” and “Purchasers” shall include the Deal Agents in their individual capacity, if any such Deal Agent shall become a Purchaser hereunder.

Section 7.7 Successor Deal Agent.

Each Deal Agent may, upon 5 days’ notice to the Issuer, the related Purchasers and the Series Enhancer, if any, and each Deal Agent will, upon the direction of all of its related Purchasers, resign as Deal Agent. If such Deal Agent shall resign, then the Purchasers related to such Deal Agent during such 5-day period shall appoint from among the applicable Purchasers a

 

 

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successor agent. If for any reason no successor Deal Agent is appointed during such 5-day period, then effective upon the termination of such 5-day period, the Purchasers related to such Deal Agent shall perform all of the duties of a Deal Agent hereunder and the Issuer shall for all purposes deal directly with such Purchasers. After any retiring Deal Agent’s resignation hereunder as Deal Agent, the provisions of Article VI and Article VII hereof shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Deal Agent under this Agreement. Any retiring Deal Agent shall provide prompt written notice of its resignation hereunder to each Rating Agency.

 

 

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ARTICLE VIII

MISCELLANEOUS

Section 8.1 Amendments and Waivers.

(1) No amendment, waiver or modification of any provision of this Agreement shall be effective without the written agreement of the Issuer, Purchasers representing in aggregate more than fifty percent (50%) of the then aggregate Series 2008-1 Note Existing Commitment (or, if the Conversion Date has occurred, the then Aggregate Series 2008-1 Principal Balance), the Deal Agents and, unless such amendment or modification deals solely with the matters set forth in Article VII hereof, the Control Party for Series 2008-1; provided, however, that no such amendment, modification or waiver shall:

(a) without consent of each affected Purchaser and Deal Agent, (A) reduce the amount of any fee payable to the Purchasers or the Deal Agents for the benefit of the Purchasers, (B) consent to, or permit the assignment or transfer by the Issuer of any of its rights and obligations under this Agreement, (C) amend this Agreement in any way that would require the consent of each Noteholder under Section 1002(a) of the Indenture, (D) extend the Conversion Date or increase its Series 2008-1 Note Existing Commitment or (E) amend or modify any defined term (or any defined term used directly or indirectly in such defined term) used in clauses (A) through (D) above in a manner which would circumvent the intention of the restrictions set forth in such clauses; or

(b) without the written consent of each affected Deal Agent, amend, modify or waive any provision of this Agreement if the effect thereof is to affect the rights or duties of each such Deal Agent.

Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Any modification or waiver shall apply to each of the Purchasers equally and shall be binding upon the Issuer, the Purchasers and the Deal Agents.

(2) The Deal Agents shall provide prompt written notice of the nature of each amendment to this Agreement, and shall, simultaneously therewith, deliver a copy of such amendment to each Rating Agency.

Section 8.2 Notices, Etc.

All demands, notices and communications hereunder shall be in writing, personally delivered, by facsimile (with subsequent telephone confirmation of receipt thereof), or sent by internationally recognized overnight courier service, to the addresses set forth on the signature pages hereto (and for the Administrative Agent, to the address set forth in the Indenture) or at other such address as shall be designated by such party in a written notice to the other parties hereto. Notice shall be effective and deemed received (a) two days after being delivered to the courier service, if sent by courier, (b) upon receipt of confirmation of transmission, if sent by telecopy, or (c) when delivered, if delivered by hand.

 

 

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Section 8.3 No Waiver; Remedies.

No failure on the part of a Deal Agent or a Purchaser to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

Section 8.4 Binding Effect.

This Agreement shall be binding upon and inure to the benefit of the Issuer, the Deal Agents, the Purchasers and their respective successors and permitted assigns.

Section 8.5 Term of this Agreement.

This Agreement, including, without limitation, the Issuer’s obligations to observe its covenants and agreements set forth herein, shall remain in full force and effect until the Collection Date; provided, however, that the obligations of the Issuer under the indemnification and payment provisions of Article VI and the provisions of Section 8.9 and Section 8.10 and the agreements of the parties contained in Sections 8.6, 8.7, 8.8 and 8.12 shall be continuing and shall survive any termination of this Agreement.

Section 8.6 GOVERNING LAW.

THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW BUT OTHERWISE WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW, AND THE RIGHTS, OBLIGATIONS AND REMEDIES OF THE PARTIES HERETO SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK .

Section 8.7 WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION.

(1) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE PARTIES HERETO ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP BETWEEN ANY OF THEM IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. INSTEAD, ANY SUCH DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.

(2) THE PARTIES HERETO HEREBY IRREVOCABLY SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT LOCATED IN THE COUNTY OF NEW YORK, SOLELY FOR THE PURPOSES OF ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND TO OR IN CONNECTION WITH THIS AGREEMENT ANY OF THE SERIES 2008-1 TRANSACTION

 

 

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DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREUNDER OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREE THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD OR DETERMINED IN ANY SUCH COURT. IN THE EVENT THAT ANY SUCH ACTION, SUIT OR PROCEEDING IS BROUGHT IN A STATE COURT, THE PARTIES WILL SEEK ASSIGNMENT TO THE COMMERCIAL PART OF SAID COURT. THE PARTIES HERETO AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HERETO HEREBY WAIVE AND AGREE NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THE SERIES 2008-1 TRANSACTION DOCUMENTS OR THE SUBJECT MATTER THEREOF MAY NOT BE LITIGATED IN OR BY SUCH COURTS.

(3) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HERETO SHALL NOT SEEK AND HEREBY WAIVE THE RIGHT TO ANY REVIEW OF THE JUDGMENT OF ANY SUCH COURT BY ANY COURT OF ANY OTHER NATION OR JURISDICTION WHICH MAY BE CALLED UPON TO GRANT AN ENFORCEMENT OF SUCH JUDGMENT.

Section 8.8 Inspection Rights, Costs, Expenses and Taxes.

In addition to the rights of indemnification granted to the Deal Agents, the Purchasers and their respective Affiliates under Article VI hereof, the Issuer agrees to pay on demand all costs and expenses incurred by a Purchaser, a Deal Agent and their respective Affiliates, successors or assigns, with respect to enforcing their respective rights and remedies as against the Issuer under this Agreement, the Indenture, any Note, any other Series 2008-1 Transaction Document and the other documents to be delivered hereunder or in connection herewith; provided, however, that none of the Deal Agents, any Purchaser or any Affiliate thereof shall be entitled to any such payment (and shall reimburse the Issuer for any such payments previously received) if such person has been determined by a court of competent jurisdiction to not be entitled to receive indemnification pursuant to Article VI hereof in connection with such enforcement. The Issuer also agrees to pay on demand all costs and expenses of the Purchasers and the Deal Agents, and their respective Affiliates, successors or assigns, if any (including reasonable and documented counsel fees and expenses), incurred in connection with the negotiation, execution, and delivery of this Agreement and the transactions contemplated hereby, any removal of the Manager or the enforcement, administration (including periodic auditing), amendment or modification of, or any waiver or consent issued in connection with, this Agreement, the Series 2008-1 Transaction Documents and the other documents to be delivered hereunder, including, without limitation, the reasonable and documented fees and out-of-pocket expenses of counsel for the Purchasers and the Deal Agents with respect thereto and with respect

 

 

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to advising the Purchasers and the Deal Agents as to their rights and remedies under this Agreement, the Series 2008-1 Transaction Documents and the other agreements executed pursuant hereto; provided, however, that the Issuer’s obligation to pay any such costs or expenses incurred in connection with the ongoing inspection of the books and records of the Issuer will be subject to such limitations and conditions as are set forth in Section 1304 of the Indenture. Any amounts subject to the provisions of this Section 8.8 shall be paid by the Issuer to the applicable Deal Agent on the Payment Date immediately following such Deal Agent’s demand therefor. Notwithstanding anything to the contrary, the Issuer’s obligations to make payments under this Section 8.8 shall be limited solely to funds available from time to time for such purpose pursuant to Section 302 or Section 806 of the Indenture and to the extent they are not so paid, such obligations shall not constitute a “claim” (as defined in Section 101(5) of the Bankruptcy Code) against the Issuer.

Section 8.9 No Proceedings.

(a) Each of the Issuer, the Deal Agents, the Purchasers and the Liquidity Agents hereby agrees that it will not institute, or join any other Person in instituting, against any CP Purchaser any bankruptcy, insolvency, winding up, dissolution, receivership, conservatorship or other similar proceeding or action so long as any Commercial Paper issued by any CP Purchasers shall be outstanding or there shall not have elapsed one year and one day since the last day on which any such Commercial Paper shall have been outstanding.

(b) Notwithstanding any prior termination of this Agreement, each Deal Agent, Purchaser, Liquidity Provider and Liquidity Agent agrees that it shall not, with respect to the Issuer, institute or join any other Person in instituting any proceeding of the type referred to in the definition of “Bankruptcy Event” against or with respect to the Issuer or so long as any Outstanding Obligation shall be unpaid and there shall not have elapsed one year plus one day since the last day on which any such Outstanding Obligation shall have been unpaid. The foregoing shall not limit the right of any such Person to file any claim in or otherwise take any action with respect to any such proceeding that was instituted against Issuer by any Person other than any Deal Agent, Purchaser, the Liquidity Provider or Liquidity Agent. In addition, each Deal Agent, Purchaser, Liquidity Provider and Liquidity Agent agrees that all amounts owed to it by Issuer shall be payable solely from amounts that become available for such payment pursuant to the Series 2008-1 Transaction Documents, and no such amounts shall constitute a claim (as defined in Section 101(5) of the Bankruptcy Code) against Issuer to the extent that they are in excess of the amounts available for their payment.

“Bankruptcy Event” means, for any Person, any of the following events:

(a) a case or other proceeding shall be commenced, without the application or consent of such Person, in any court, seeking the liquidation, reorganization, debt arrangement, dissolution, winding up or composition or readjustment of debts of such Person, the appointment of a trustee, receiver, custodian, liquidator, assignee, sequestrator or the like for such Person or any substantial part of its assets, or any similar action with respect to such Person under any law relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, and such case or proceeding shall continue undismissed, or unstayed and in effect, for a period of 60 days; or any order for relief in respect of such Person shall be entered in an involuntary case under the federal bankruptcy laws or other similar laws now or hereafter in effect, or

 

 

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(b) such Person shall commence a voluntary case or other proceeding under any applicable bankruptcy, insolvency, reorganization, debt arrangement, dissolution or other similar law now or hereafter in effect, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator or the like, for such Person or any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail to, or admit in writing its inability to, pay its debts generally as they become due.

Section 8.10 Recourse Against Certain Parties.

(a) No recourse under or with respect to any obligation, covenant or agreement, (including, without limitation, the payment of any fees or any other obligations) of any of the Issuer, any Purchaser or any Deal Agent as contained in this Agreement or any other agreement, instrument or document entered into by it pursuant hereto or in connection herewith shall be had against any administrator of such party or any incorporator, affiliate, stockholder, member, manager, officer, employee or director of such party or of any such administrator, as such, by the enforcement of any assessment or by any legal or equitable proceeding, by virtue of any statute or otherwise; it being expressly agreed and understood that the agreements of such party contained in this Agreement and all of the other agreements, instruments and documents entered into by it pursuant hereto or in connection herewith are, in each case, solely the corporate obligations of such party, and that no personal liability whatsoever shall attach to or be incurred by any administrator of such party or any incorporator, stockholder, member, manager, affiliate, officer, employee or director of such party or of any such administrator, as such, or any of them, under or by reason of any of the obligations, covenants or agreements of such party contained in this Agreement or in any other such instruments, documents or agreements, or which are implied therefrom, and that any and all personal liability of every such administrator of such party and each incorporator, stockholder, member, manager, affiliate, officer, employee or director of such party or of any such administrator, or any of them, for breaches by such party of any such obligations, covenants or agreements which liability may arise either at common law or at equity, by statute or constitution, or otherwise, is hereby expressly waived as a condition of and in consideration for the execution of this Agreement.

(b) Notwithstanding anything contained in this Agreement or any other Series 2008-1 Transaction Document, no CP Purchaser shall have any obligation to pay any amount required to be paid by it hereunder or thereunder to its Deal Agent, or to any other Person, in excess of any amount available to such CP Purchaser after paying or making provision for the payment of its Commercial Paper. All payment obligations of a CP Purchaser hereunder are contingent upon the availability of funds in excess of the amounts necessary to pay Commercial Paper; and each Liquidity Agent, the Issuer and each Deal Agent agrees that they shall not have a “claim” (as defined in Section 101(5) of the Bankruptcy Code) if and to the extent that any such payment obligation exceeds the amount available to a CP Purchaser to pay such amounts after paying or making provision for the payment of its Commercial Paper.

 

 

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Section 8.11 Ratable Payments.

If any Purchaser, whether by setoff or otherwise, has payment made to it with respect to any portion of any amount of the principal amount of any Note or other amount owing to such Purchaser (other than payments received pursuant to Article VI) in a greater proportion than that received by any other Purchaser, such Purchaser agrees, promptly upon demand, to pay to the Deal Agent, for distribution ratably to all other Purchasers, the amount of such excess such that all Purchasers shall receive their ratable portion of such payment.

Section 8.12 Confidentiality.

(1) Each of the Deal Agents, the Purchasers and the Issuer shall maintain and shall cause each of its employees and officers to maintain the confidentiality of this Agreement and the other confidential proprietary information with respect to the other parties hereto and their respective businesses obtained by it or them in connection with the structuring, negotiating and execution of the transactions contemplated herein, except that each such party and its officers and employees may (i) disclose such information to any prospective assignees or participants and to its external accountants and attorneys and as required by law, applicable accounting requirements or order of any judicial or administrative proceeding and (ii) disclose the existence of this Agreement, but not the financial terms thereof.

(2) Anything herein to the contrary notwithstanding, the Issuer hereby consents to the disclosure of any nonpublic information with respect to it (i) to the Deal Agents, the Liquidity Agents, the Liquidity Providers, prospective Liquidity Providers or a Purchaser by each other, (ii) by a Deal Agent or the Purchasers to any prospective or actual assignee or participant of any of them or (iii) by a Deal Agent to any rating agency that provides a rating for the Commercial Paper, any Commercial Paper dealer or placement agent or provider of a surety, guaranty or credit or liquidity enhancement to a Purchaser and to any officers, directors, employees, outside accountants and attorneys of any of the foregoing, provided each such Person is informed of the confidential nature of such information and agrees to keep such information confidential pursuant to the terms of this Section 8.12. In addition, the Purchasers, the Liquidity Agents, the Liquidity Providers and the Deal Agents may disclose any such nonpublic information pursuant to any law, rule, regulation, direction, request or order of any judicial, administrative or regulatory authority or proceedings (whether or not having the force or effect of law).

Section 8.13 Execution in Counterparts; Severability; Integration.

This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. Execution and delivery of this Agreement by facsimile signature shall constitute execution and delivery of this Agreement for all purposes hereof with the same force and effect as execution and delivery of a manually signed copy hereof. In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. This Agreement contains the final and complete integration of all prior expressions by the parties hereto with

 

 

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respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof, superseding all prior oral or written understandings.

[Signature pages follow.]

 

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first above written.

 

THE ISSUER:

 

TAL ADVANTAGE II LLC

 

 

 

 

 

 

By: 

TAL International Container Corporation, its manager

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

100 Manhattanville Road
Purchase, New York 10577-2135
Attn: Jeffrey Casucci
Email: jeffrey.casucci@talinternational.com

 

 

 

 

 

 

With a copy to:

 

 

 

 

 

 

TAL International Container Corporation
100 Manhattanville Road
Purchase, New York 10577-2135
Attn: Jeffrey Casucci, Vice President and Treasurer
Fax: 914 697 2526

 

 

SERIES 2008-1 NOTE PURCHASE AGREEMENT

 



THE PURCHASERS, CP PURCHASERS

DEAL AGENTS, LIQUIDITY PROVIDERS

AND LIQUIDITY AGENTS:

 

 

 

FORTIS CAPITAL CORP.

 

 

 

 

 

 

By: 

 

 

 

Name:

 

 

 

Title:

 

 

 

SERIES 2008-1 NOTE PURCHASE AGREEMENT

 


EX-10.57 7 file7.htm GUARANTY DATED MARCH 27, 2008

GUARANTY

GUARANTY (this “Guaranty”), dated as of March 27, 2008, is made by TAL INTERNATIONAL GROUP, INC., a corporation organized under the laws of the State of Delaware (together with its successors and assigns, the “Guarantor”).

RECITALS:

WHEREAS, pursuant to the Series 2008-1 Supplement, dated as of March 27, 2008 (as amended, modified or supplemented from time to time in accordance with its terms, the “Series 2008-1 Supplement”) issued pursuant to, and incorporating the terms of, the Indenture, dated as of March 27, 2008 (as amended, modified or supplemented from time to time in accordance with its terms, the “Indenture”), between TAL Advantage II LLC, as issuer (together with its successors and permitted assigns, the “Issuer”), and U.S. Bank National Association, as indenture trustee (together with its successors and permitted assigns, the “Indenture Trustee”), the Series 2008-1 Noteholders have committed to make loans to the Issuer from time to time in an aggregate principal amount outstanding not to exceed the commitment amounts set forth in the Series 2008-1 Supplement;

WHEREAS, in order to induce the Series 2008-1 Noteholder to enter into the Series 2008-1 Supplement, the Guarantor will execute and deliver this Guaranty to the Indenture Trustee, not in its individual capacity but as representative of the Series 2008-1 Noteholders (the Indenture Trustee and the Series 2008-1 Noteholders, each, a “Beneficiary” and collectively the “Beneficiaries”) pursuant to which such Guarantor will guaranty, among other things, payment of the Obligations, as hereinafter defined; and

WHEREAS, the Issuer is a direct or indirect Subsidiary of the Guarantor, the Guarantor will receive substantial direct or indirect benefit from the transaction described in the Series 2008-1 Supplement and therefore it is in the best interest of the Guarantor to enter into this Guaranty.

AGREEMENT:

Accordingly, the Guarantor agrees for the benefit of the Beneficiaries and each of its permitted assigns or transferees, as follows:

1. Certain Terms.

(a) Capitalized terms used herein without definition have the respective meanings set forth in the Series 2008-1 Supplement.

(b) “Obligations” means any and all present and future payment obligations and liabilities of the Issuer of every type and description to the Beneficiary, or any of their successors or permitted assigns under the Series 2008-1 Supplement and the other Series 2008-1 Transaction Documents, whether for principal, interest, fees, expenses or other amounts (including attorneys’ fees and expenses), in each case whether due or not due, direct or indirect, joint and/or several, absolute or contingent, voluntary or involuntary, liquidated or unliquidated, determined or

 

 



undetermined, now or hereafter existing, renewed or restructured, whether or not from time to time decreased or extinguished and later increased, created or incurred, whether or not arising after the commencement of a proceeding under the Bankruptcy Code (including post-petition interest) and whether or not allowed or allowable as a claim in any such proceeding, and whether or not recovery of any such obligation or liability may be barred by a statute of limitations or such obligation or liability may otherwise be unenforceable. All Obligations shall be conclusively presumed to have been created in reliance on this Guaranty.

(c) “Deficiency Amount” means (a) for each Payment Date other than the Series 2008-1 Legal Final Maturity Date, any shortfall in the aggregate amount available in the Series 2008-1 Series Account for the Series 2008-1 Notes or any other amounts available under the Indenture or the Series 2008-1 Supplement (including any Manager Advance) to pay both (i) the Series 2008-1 Interest Payment for such Payment Date and (ii) the Scheduled Principal Payment Amount for such Payment Date, and (b) on the Series 2008-1 Legal Final Maturity Date, any shortfall in the aggregate amount available in the Series 2008-1 Series Account or any other amounts available under the Indenture or this Supplement to pay the then Aggregate Series 2008-1 Principal Balance, accrued but unpaid interest thereon and all other amounts owing to the Series 2008-1 Noteholders pursuant to the terms of the Series 2008-1 Transaction Documents.

2. Guaranty.

(a) The Guarantor hereby absolutely, unconditionally and irrevocably guaranties to each of the Beneficiaries the full and punctual payment when due of all Obligations on the earlier to occur of the Series 2008-1 Legal Final Maturity Date and the date on which the Series 2008-1 Notes have been accelerated in accordance with the terms of the Indenture, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, and such guaranty is not conditional or contingent upon pursuit by the Beneficiary of any prior action or proceeding for collection, or for any other remedies the Beneficiaries may have, against any Borrower or any other Person. All such amounts and all other amounts payable hereunder shall be payable on demand.

(b) In order to implement this Guaranty, on the Business Day preceding each Payment Date on which the related Manager Report indicates that a Deficiency Amount will exist on the related Payment Date, the Indenture Trustee shall deliver to the Guarantor a certificate in the form of Exhibit A hereto.

3. Expenses. The Guarantor agrees to pay to the Beneficiaries any and all reasonable and documented costs and expenses, (including reasonable and documented attorneys’ fees and expenses), that the Beneficiaries may incur in connection with (a) the collection of all sums guarantied hereunder or (b) the exercise or enforcement of any of the rights, powers or remedies of the Beneficiaries under this Guaranty or applicable law.

4. Consent. The Guarantor hereby consents and agrees that the time or place of payment of any Obligation may be exchanged or extended, in whole or in part, to a time certain or otherwise, and may be renewed or accelerated, in whole or in part; that any of the provisions of the Series 2008-1 Supplement may be renewed, extended, modified, increased, accelerated, compromised, refinanced or waived; that the Borrowers may be granted indulgences or released from liability; that the insolvency, bankruptcy and/or dissolution of any or all of the Borrowers or of

 

 

2

 



the Guarantor shall not affect the Obligations hereunder of any Guarantor; that neither the invalidity or unenforceability of any of the Obligations shall affect the obligations hereunder of the Guarantor; that no claim need be asserted against any trustee in bankruptcy or receiver or other representative in the event any Borrower or the Guarantor is adjudicated bankrupt or becomes insolvent; and that any property to the credit of any Borrower or the Guarantor or any other party liable for payment of any of the Obligations may be released from time to time, in whole or in part, at, before or after the stated, extended or accelerated maturity of such Obligations, all of which (i) may be effected without notice to or further assent by the Guarantor and (ii) shall not affect the obligations of the Guarantor under this Guaranty.

5. Waiver. The Guarantor hereby expressly waives, to the extent permitted by applicable law:

(a) Notice of acceptance of this Guaranty;

(b) Protest and notice of dishonor or default to the Guarantor or to any other party with respect to any Obligation or any security for any Obligation;

(c) Demand for payment under this Guaranty;

(d) Notice of disposition of any security for any Obligation;

(e) Any defense by reason of impairment of: (i) any security now or hereafter held for any Obligation; or (ii) recourse against any party liable for the payment of any Obligation; and

(g) Any other defense or counterclaim whatsoever, other than indefeasible payment and performance of the Obligations.

6. Guaranty of Payment. This Guaranty is a guaranty of payment and not of collection. The Guarantor: (a) waives any claim to marshaling of assets and (b) waives any right to require that an action be brought against the Issuer or any other Person prior to action against the Guarantor hereunder. The Guarantor shall be released from all liability hereunder only upon payment in full of all the Obligations.

7. Binding Effect. The provisions of this Guaranty shall be binding upon the Guarantor and its successors and assigns, and shall inure to the benefit of the Beneficiary and its successors and permitted assigns. The Guarantor may not assign its rights, benefits, duties and obligations under this Guaranty without the prior written consent of the Beneficiaries.

8. Right of Set Off. To the extent that the Guarantor has made payment hereunder to any Beneficiary of all or any portion of principal and interest required to be paid under the Series 2008-1 Supplement, the full amount of such payment shall be deducted from amounts allocable and payable to such Beneficiary pursuant to such Series 2008-1 Supplement.

9. Limitation of Guaranty. Any term or provision of this Guaranty or the Series 2008-1 Supplement to the contrary notwithstanding, the maximum aggregate amount of the Obligations

 

 

3

 



for which the Guarantor shall be liable shall not exceed the maximum amount for which the Guarantor can be liable without rendering this Guaranty voidable under applicable law relating to fraudulent conveyance or fraudulent transfer.

10. Representations and Warranties. The Guarantor makes the following representations, warranties and agreements with the Beneficiaries:

(a) Corporation Status. The Guarantor is a duly organized and validly existing corporation in good standing under the laws of the State of Delaware.

(b) Power and Authority. The Guarantor has the power and authority to execute, deliver and carry out the terms and provisions of this Guaranty and has taken all necessary corporate action to authorize the execution, delivery and performance of this Guaranty. The Guarantor has duly executed and delivered the Guaranty and the Guaranty constitutes the legal, valid and binding obligation of the Guarantor enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws generally affecting creditors’ rights and by equitable principles (regardless of whether enforcement is sought in equity or at law).

(c) No Violation. Neither the execution, delivery or performance by the Guarantor of the Guaranty, nor compliance by the Guarantor with the terms and provisions thereof, nor the consummation of the transactions contemplated herein or therein, (i) will contravene any material provision of any applicable law, statute, rule or regulation, or any order, writ, injunction or decree of any court or governmental instrumentality, (ii) will conflict or be inconsistent with or result in any breach of, any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien upon any of the property or assets of the Guarantor pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement, credit agreement or any other agreement, contract or instrument to which the Guarantor is a party or by which it or any of its material property or assets are bound or to which it may be subject, or (iii) will violate any provision of the certificate of incorporation of the Guarantor.

(d) Litigation. There are no actions, suits, proceedings or investigations pending or, to the knowledge of the Guarantor, threatened in writing (i) with respect to this Guaranty or (ii) with respect to any other matter, as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, either individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.

(e) Governmental Approvals. Except as may have been obtained or made on or prior to the Closing Date (and which remain in full force and effect on the Closing Date), no order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by, any domestic or foreign governmental or public body or authority, or any subdivision thereof, is required to authorize, in respect of the Guarantor, or is required to be obtained by the Guarantor in connection with (i) the execution, delivery and performance by the Guarantor of this Guaranty or (ii) the legality, validity, binding effect or enforceability of this Guaranty with respect to the Guarantor.

 

 

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11. Reinstatement. This Guaranty shall remain in full force and effect and continue to be effective or be reinstated, as the case may be, if at any time payment or performance of the Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Obligations or such part thereof, whether as a “voidable preference,” “fraudulent transfer,” or otherwise, all as though such payment or performance had not been made. In the event that, and to the extent that, any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall, to the fullest extent permitted by law, be reinstated, and shall be deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

12. Subrogation. After (and not before) all amounts payable under or in respect of the Series 2008-1 Supplement and all other Obligations have been indefeasibly paid in full and in cash and fully performed, the Guarantor shall be subrogated to the rights of the Beneficiaries to receive payments in respect of the Series 2008-1 Supplement and the other Obligations, but only to the extent of amounts paid by the Guarantor under this Guaranty.

13. Amendment. This Guaranty may not be modified or amended except by a writing duly executed by the Guarantor and the Indenture Trustee (acting at the direction of the Majority of Holders of the Series 2008-1 Noteholders).

14. Law. THIS GUARANTY SHALL BE CONSTRUED IN ACCORDANCE WITH, AND THIS GUARANTY AND ALL CLAIMS AND CAUSES OF ACTION ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE GOVERNED BY, THE LAWS (OF THE STATE OF NEW YORK (OTHER THAN CHOICE OF LAW RULES THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION).

15. Severability. Wherever possible, each provision of this Guaranty shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Guaranty shall be invalid under such laws, such provision shall be ineffective only to the extent of such prohibition or invalidity, without affecting the remainder of such provision or the remaining provisions of this Guaranty, which shall be binding and enforceable to the fullest extent allowable by law.

16. Waiver. Waiver by the Beneficiaries of a breach of this Guaranty shall not operate as a waiver of any subsequent breach thereof.

17. Signatures; Counterparts. Facsimile transmissions of any executed original document and/or retransmission of any executed facsimile transmission shall be deemed to be the same as the delivery of an executed original. At the request of any party hereto, the other parties hereto shall confirm facsimile transmissions by executing duplicate original documents and delivering the same to the requesting party or parties. This Guaranty may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same instrument.

 

 

5

 



18. Notices. All notices, requests and other communications to be given or otherwise made to any party hereto shall be deemed to be sufficient if contained in a written instrument duly transmitted by facsimile or duly sent by overnight courier service or first class registered or certified mail, postage prepaid, addressed to such party at the address set forth below or at such other address as may hereafter be designated in writing by the addressee to the addressor listing all parties:

 

(a)

if to the Guarantor:

TAL International Group, Inc.

100 Manhattanville Road

Purchase, New York 10577-2135

Fax: (914) 697-2526

Phone: (914) 697-2554

Attention: Marc A. Pearlin

 

(b)

if to the Indenture Trustee:

U.S. Bank National Association

60 Livingston Avenue

St. Paul, Minnesota 55107

Fax: (651) 495-8090

Attention: TAL Advantage II, LLC, Floating Rate

Secured Notes, Series 2008-1

19. Consents and Waivers Relating to Legal Proceedings.

(a) THE GUARANTOR AND EACH BENEFICIARY (BY ACCEPTANCE OF RIGHTS HEREUNDER) WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION UNDER THIS GUARANTY OR ANY ACTION ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY, REGARDLESS OF WHICH PARTY INITIATES SUCH ACTION OR ACTIONS.

(b) Pursuant to Section 5-1402 of the New York General Obligations Law, all actions or proceedings arising in connection with this Guaranty shall be tried and litigated in state or Federal courts located in the Borough of Manhattan, New York City, State of New York. THE GUARANTOR AND (BY ACCEPTANCE OF RIGHTS HEREUNDER) EACH BENEFICIARY WAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS, TO ASSERT THAT IT IS NOT SUBJECT TO THE JURISDICTION OF SUCH COURTS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION. Nothing contained in this clause shall preclude the Beneficiaries from bringing any action or proceeding arising out of or relating to this Guaranty in the courts of any place where the Guarantor or any of its assets or assets of any of the Borrowers or any of its assets may be found or located.

 

 

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20. Guaranty Enforceable by Indenture Trustee. Notwithstanding anything to the contrary contained elsewhere in this Guaranty, the Beneficiaries agree (by their acceptance of the benefits of this Guaranty) that this Guaranty may be enforced only by the action of the Indenture Trustee (acting at the direction of the Series 2008-1 Noteholders.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

7

 



IN WITNESS WHEREOF, the undersigned have executed this Guaranty as of the ___ day of March, 2008.

 

 

 

TAL INTERNATIONAL GROUP, INC.

 


By: 

 

 

 

Name:

 

 

 

Title:

 

 

 

Acknowledged and Agreed:

 

 


U.S. BANK NATIONAL ASSOCIATION,

as Indenture Trustee

 


By: 

 

 

 

Name:

 

 

 

Title:

 

 

 


EX-31.1 8 file8.htm CERTIFICATION

Exhibit 31.1

CERTIFICATION

I, Brian M. Sondey, President and Chief Executive Officer of TAL International Group, Inc., certify that:

1.  I have reviewed this quarterly report on Form 10-Q of TAL International Group, Inc.;
2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15(d)-15(f) for the registrant and have:
(a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)  Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)  Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2008

/s/ Brian M. Sondey                                                
Brian M. Sondey
President and Chief Executive Officer



EX-31.2 9 file9.htm CERTIFICATION

Exhibit 31.2

CERTIFICATION

I, Chand Khan, Senior Vice President and Chief Financial Officer of TAL International Group, Inc., certify that:

1.  I have reviewed this quarterly report on Form 10-Q of TAL International Group, Inc.;
2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15(d)-15(f) for the registrant and have:
(a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)  Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)  Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2008


  /s/ Chand Khan
  Chand Khan
Senior Vice President and Chief Financial Officer



EX-32.1 10 file10.htm CERTIFICATION

Exhibit 32.1

CERTIFICATION BY CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of TAL International Group, Inc. (the ‘‘Company’’) on Form 10-Q for the period ended March 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the ‘‘Report’’), I, Brian M. Sondey, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 9, 2008


  /s/ Brian M. Sondey
  Brian M. Sondey
President and Chief Executive Officer



EX-32.2 11 file11.htm CERTIFICATION

Exhibit 32.2

CERTIFICATION BY CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of TAL International Group, Inc. (the ‘‘Company’’) on Form 10-Q for the period ended March 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the ‘‘Report’’), I, Chand Khan, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 9, 2008


  /s/ Chand Khan
  Chand Khan
Senior Vice President and Chief Financial Officer



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