Part I Equipment Leasing: Theory and Practical Guidance

CHAPTER 1 Lease vs. Purchase or Borrow Decision


P 1.01 Scope


P 1.02 True Lease or Conditional Sales Agreement


P 1.03 Conditional Sales Agreement with One Dollar Purchase Option


P 1.04 Conditional Sales Agreement with Bargain Purchase Option


P 1.05 True Lease vs. Purchase and Borrow Decision

CHAPTER 2 Statutory Treatment of Leasing Transactions: The Legislative History of Article 2A and the UNIDROIT Convention on International Financial Leasing


P 2.01 Scope


P 2.02 Leasing in Our Economy


P 2.03 Drafting the 1987 Version of Article 2A


P 2.04 The Adoption Process


P 2.05 The 1990 Revision


P 2.06 Comparison of 1987 and 1990 Versions


P 2.07 Judicial Acceptance of Article 2A


P 2.08 Model and Structure of Article 2A


P 2.09 International Leasing Transactions


P 2.10 Statutory Treatment of Leases: The End or Merely the Beginning


CHAPTER 3 Article 2A--Statutory Analysis


P 3.01 Scope of Chapter


P 3.02 Overview of Article 2A


P 3.03 Article 2A and Other Law


P 3.04 General Provisions


P 3.05 The Finance Lease


P 3.06 Warranties Under Article 2A


P 3.07 Risk of Loss


P 3.08 Alienability of Interests


P 3.09 Fixtures


P 3.10 Default


P 3.11 Damages and Other Remedies


P 3.12 The Lessor's Remedies Upon the Lessee's Default


P 3.13 The Lessee's Remedies Upon the Lessor's Default


P 3.14 The Impact of Article 2A


CHAPTER 4 How the Uniform Commercial Code and Common Law Distinguish a True Lease from a Security Interest


P 4.01 Introduction


P 4.02 Some Notes on Terminology


P 4.03 The Significance of the Distinction


P 4.04 The Statute


P 4.05 The Need to Look Beyond the Statute for Answers--Supplementary Concepts


P 4.06 An Alternative Principle for Understanding Both the Statute and the Concepts Offered to Supplement the Statute


P 4.07 The Puzzling Case of TRAC Leases


P 4.08 Conclusion




CHAPTER 5 State Law Issues


P 5.01 Scope


P 5.02 Corporate Formalities


P 5.03 Foreign Corporation Licensing, Registration and Reporting Requirements


P 5.04 Usury Laws


P 5.05 Unconscionability


P 5.06 Common-Law and Statutory Liens


P 5.07 State Filing Taxes


P 5.08 Choice of Law


P 5.09 Consent to Jurisdiction and Forum


P 5.10 Security Deposits


CHAPTER 6 Annotated Middle Market Master Lease and Equipment Schedule


P 6.01 Scope of Chapter


P 6.02 Annotated Middle Market Master Lease Agreement


P 6.03 Annotated Lease Schedule


Appendix A Form of Middle Market Master Lease and Equipment Schedule


CHAPTER 7 Annotated Unconditional Continuing Guaranty and Letter of Credit


P 7.01 Scope of Chapter


P 7.02 Annotated Unconditional Continuing Guaranty


P 7.03 Annotated Letter of Credit


Appendix A Form of Unconditional Continuing Guaranty


Appendix B Form of Letter of Credit


CHAPTER 8 Commitment Letters and Other Preliminary Agreements (Written and Unwritten); Liability for Failing to Close


P 8.01 Scope of Chapter


P 8.02 Types of Preliminary Documents


P 8.03 Content of Preliminary Documents


P 8.04 "Unintentional" Commitments; Liability for Failing to Close


P 8.05 Sample Clauses


Appendix 8A Forms


CHAPTER 9 Legal Opinions


P 9.01 Scope of Chapter


P 9.02 Overview of Legal Opinions


P 9.03 In-House Versus Outside Counsel Opinions


P 9.04 Specific Clauses


P 9.05 Specific Kinds of Opinions


P 9.06 Illustrative Opinion Forms


Appendix 9A Bibliography


CHAPTER 10 Insurance


P 10.01 Insurance in Equipment Leases


P 10.02 Negotiation of Insurance Provisions


P 10.03 Sources of Insurance


P 10.04 Insurance in Ship Leases


P 10.05 Insurance in Aircraft Leases


P 10.06 Insurance in Satellite Transponder Leases


P 10.07 Insurance in Railroad Leases


P 10.08 Insurance in Computer Leases


P 10.09 Residual Value Insurance


CHAPTER 11 Mergers and Acquisitions, Portfolio Purchases and Vendor Programs


P 11.01 Mergers and Acquisitions and Portfolio Purchases


P 11.02 Vendor Programs


CHAPTER 12 Vendor Finance


P 12.01 Introduction


P 12.02 Areas of Primacy


P 12.03 Types of Programs


P 12.04 Joint Venture Formation


P 12.05 Relationship Specifics


P 12.06 Program Economics


P 12.07 Reporting


P 12.08 Dealer Finance


P 12.09 Purchase Process (for Lease Finance)


P 12.10 Credit Support


P 12.11 Program Marketing


P 12.12 Remarketing


P 12.13 Portfolio Servicing


P 12.14 Separation Issues


P 12.15 Finance Partner Issues


P 12.16 Accounting Issues


P 12.17 Regulation


P 12.18 Additional Considerations for Specific Asset Types


P 12.19 Conclusion


CHAPTER 13 Securitization


P 13.01 Equipment Lease Securitization Generally


P 13.02 Portfolio Analysis


P 13.03 Credit Enhancement


P 13.04 Accounting Aspects


P 13.05 Tax Considerations


P 13.06 Bankruptcy Aspects


P 13.07 Securities Law Aspects


P 13.08 UCC Considerations


P 13.09 Certain Regulatory Aspects


P 13.10 Selected Bibliography



CHAPTER 13A Synthetic Leasing


P 13A.01 Overview


P 13A.02 Benefits to the Lessee


P 13A.03 Operating Lease Treatment


P 13A.04 Lease Intended for Security or Conditional Sale


P 13A.05 Documentation


P 13A.06 End of Term Options


P 13A.07 Third Party Financing


P 13A.08 Specific Issues to Be Considered


P 13A.09 Conclusion


Appendix A MASTER LEASE AGREEMENT


Appendix B EQUIPMENT SCHEDULE


CHAPTER 14 Warranties in Equipment Leasing


P 14.01 Scope of Chapter


P 14.02 Defining the Applicable Law in Terms of the Type of Leasing Transaction


P 14.03 Warranties Under Common Law


P 14.04 Uniform Commercial Code


P 14.05 Waivers of Warranties


P 14.06 Article 2A


CHAPTER 15 Default, Remedies, and Litigation


P 15.01 Introduction


P 15.02 Events of Default--Contractual and Statutory


P 15.03 Pre-Litigation Review


P 15.04 Remedies


P 15.05 Obtaining Possession of the Equipment

P 15.06 Disposition of the Equipment


P 15.07 Litigation

P 15.08 Trial

P 15.09 Forms

CHAPTER 16 Equipment Lease Defaults: Calculating the Lessor's Damages

P 16.01 Equipment Leases Contrasted with Other Types of Financing

P 16.02 Elements of the Lessor's Damages

P 16.03 Lessee's Damages

P 16.04 Liquidated Damages

P 16.05 Uniform Commercial Code Article 2A


CHAPTER 17 Bankruptcy

P 17.01 Introduction and Scope

P 17.02 Dichotomy of Treatment in Bankruptcy of "True Leases" and Leases Intended as Security

P 17.03 Rejection, Assumption and Assignment

P 17.04 Selected Issues Affecting Equipment Lessors

P 17.05 Article 2A and the Bankruptcy Code

P 17.06 Forms

P 17.07 Appendix


CHAPTER 18 Fraud in Equipment Leasing

P 18.01 Scope of Chapter

P 18.02 Wrongful Omissions or Commissions

P 18.03 How to Detect Fraudulent Lease Transactions

P 18.04 Famous Frauds: Lessons to Be Learned

P 18.05 How to Prevent Fraud

P 18.06 How to Deal With Fraud Once Detected

P 18.07 Appendix


CHAPTER 19 Financing and Syndication of Equipment Lease Transactions

P 19.01 Introduction

P 19.02 "Routine" Procedures for Financing and Syndicating of Equipment Lease Transactions

P 19.03 Methods of Financing and Syndicating Equipment Lease Transactions

P 19.04 Representations and Warranties of Lessor in Financing of Equipment Lease Transactions

P 19.05 Covenants of Lessor in Financing of Equipment Lease Transactions

P 19.06 Representations, Warranties and Covenants of Funding Source

P 19.07 Remedies for Breach of Representations, Warranties and Covenants by Lessor

P 19.08 Voluntary Repurchase or Prepayment of Financed Lease Transactions

P 19.09 Negotiating Documentation for Financing of Lease Transactions



CHAPTER 20 Lessor's Tort and Lender Liability

P 20.01 Theories of Lessor Tort Liability: Scope

P 20.02 Strict Products Liability

P 20.03 Negligence

P 20.04 Avoidance Techniques: Insurance Coverage

P 20.05 Theories of Lender Liability: Background

P 20.06 Obligations of Good Faith Under the Uniform Commercial Code

P 20.07 Common Law Theories

P 20.08 Statutory Theories of Lender Liability

P 20.09 Checklist for Avoidance of Lender Liability Claims


CHAPTER 21 The Environmental Aspects of Equipment Leasing

P 21.01 Introduction

P 21.02 Comprehensive Environmental Response, Compensation and Liability Act

P 21.03 Oil Pollution Act of 1990

P 21.04 Federal Water Pollution Control Act

P 21.05 Other Significant Federal Statutes

P 21.06 Risk Management and Safeguards Against Liability


CHAPTER 22 Lease Syndication

P 22.01 Introduction

P 22.02 Equipment Syndication Structures

P 22.03 Equipment Syndication Entities

P 22.04 Securities Aspects of Syndications

P 22.05 Private Offerings

P 22.06 ERISA Considerations


CHAPTER 23 Regulation of Bank Leasing Activities

P 23.01 Introduction

P 23.02 National Banks

P 23.03 State Member Banks

P 23.04 State Nonmember Banks

P 23.05 Bank Holding Companies

P 23.06 Joint Activities

P 23.07 International Leasing Activities

P 23.08 Savings Associations

P 23.09 Affiliates of Savings Associations
P 23.10 Other Regulations


CHAPTER 24 Leveraged Leasing

P 24.01 Background

P 24.02 Overview

P 24.03 Structure of a Leveraged Lease Transaction

P 24.04 Documentation

P 24.05 Variations of Leveraged Leases

P 24.06 Federal Laws


CHAPTER 25 Operating Leases

P 25.01 Scope of Chapter

P 25.02 Definitions

P 25.03 Classes of Operating Leases

P 25.04 Drafting the Traditional Operating Lease

P 25.05 Drafting the Hybrid Operating Lease

Appendix 25A Forms


CHAPTER 26 Cross-Border Leasing

P 26.01 Introduction

P 26.02 Catalysts

P 26.03 History

P 26.04 Structural Issues

P 26.05 Applicable Law

P 26.06 Accounting and Reporting Requirements

P 26.07 Privatization and Political Climates

P 26.08 Export Financing

P 26.09 Bankruptcy

P 26.10 Uniform Codes


CHAPTER 27 Consumer Leasing

P 27.01 Scope of Chapter

P 27.02 Federal Consumer Leasing Act

P 27.03 Equal Credit Opportunity Act

P 27.04 State Laws Focused on Consumer Leases

P 27.05 Special Further Considerations


CHAPTER 28 Facility and Project Lease Financing

P 28.01 Scope

P 28.02 Distinguishing a Facility Lease from an Equipment Lease

P 28.03 Different Kinds of Facility Leases: Project Leases, Credit Leases and Hybrid Leases

P 28.04 The Pros and Cons of a Facility Lease Financing

P 28.05 Construction Financing Issues

P 28.06 Preparing for Permanent Financing

P 28.07 Special Issues for Consideration by the Parties to a Facility Lease Transaction

P 28.08 Documentation

P 28.09 Special Considerations in Closing a Facility Lease Transaction

Appendix A Facility and Project Lease Financing List of Principal Documents


CHAPTER 29 Leasing of Healthcare and Medical Equipment

P 29.01 Introduction

P 29.02 Financing the Healthcare Delivery System

P 29.03 Identity of the Lessee

P 29.04 Regulatory Considerations

P 29.05 Lessor Tort Liability

P 29.06 Bankruptcy Law Considerations

P 29.07 Re-Marketing

P 29.08 Drafting the Healthcare Equipment Lease

Appendix A Healthcare/Medical Equipment Rider to Equipment Schedule to Master Lease Agreement


Part II Specific Industry Leasing

CHAPTER 30 Satellites and Transponders

P 30.01 Introduction

P 30.02 Satellites and Transponders

P 30.03 Recommended Provisions in Financing Documentation

P 30.04 Security Interests in Transponders

P 30.05 Insurance

P 30.06 Regulatory Considerations

P 30.07 Tax Considerations


CHAPTER 31 High-Tech and Computers

P 31.01 Introduction

P 31.02 The Computer Leasing Industry

P 31.03 Characteristics of Computer and High-Technology Equipment

P 31.04 Article 2A and High-Technology Leasing

P 31.05 Analysis of Typical Computer Lease Terms and Provisions

P 31.06 Analysis of Lessor/Lessee Ancillary Documents

P 31.07 Assignment and Sale of Computer Leases

P 31.08 Leasing of Software



APPENDIX

CHAPTER 31A Venture Leasing & Software Leasing



I. VENTURE LEASING

P 31A.01 Introduction

P 31A.02 Lease Documentation

P 31A.03 Warrant Documentation

P 31A.04 Tenant Improvements and Fixtures


II. SOFTWARE LEASING

P 31A.05 Introduction

P 31A.06 Really Unsecured Financing?--Risks Inherent in Software Leasing

P 31A.07 Overview of Different Software Lease Structures

P 31A.08 Perfection of a Security Interest in Intellectual Property

P 31A.09 What Is the Proper Legal Characterization of a "Software Lease"?

P 31A.10 What Is the Governing Law in a Software Lease Transaction?

P 31A.11 Actions That a Lessor Can Take to Minimize Legal Risk

P 31A.12 Sample Forms


CHAPTER 32 Aircraft

P 32.01 Introduction

P 32.02 Aircraft

P 32.03 Recommended Provisions in Lease Documentation

P 32.04 Ownership, Leases and Security Interests in Aircraft and Engines

P 32.05 Insurance

P 32.06 Tax Considerations

P 32.07 Conclusion


CHAPTER 32A Corporate Aircraft

P 32A.01 Introduction

P 32A.02 Differences between Corporate Aircraft and Commercial Aircraft

P 32A.03 Corporate Aircraft Financing Structures

P 32A.04 Corporate Aircraft Fractional Interest Programs

P 32A.05 Financing Fractional Interests

P 32A.06 Conclusion


CHAPTER 33 Railroad Rolling Stock

P 33.01 The U.S. Rail System

P 33.02 Recordation of Interests in Railroad Equipment

P 33.03 Securities Regulation

P 33.04 Special Tax Treatment

P 33.05 Bankruptcy

P 33.06 Selected Lease Provisions

P 33.07 Appendix


CHAPTER 34 Ships and Vessels

P 34.01 Overview

P 34.02 The "Wet Lease"

P 34.03 The Ship Mortgage, Vessel Documentation, and the Jones Act

P 34.04 Special Ship Leasing Considerations

P 34.05 Glossary of Terms

P 34.06 Table of Acts, Conventions and Treaties

P 34.07 Marine Insurance Checklist

P 34.08 Ship Loan Checklist


Part III Taxation

CHAPTER 35 Federal Income Taxation of Equipment Leasing

P 35.01 Scope of Chapter

P 35.02 Determining the Owner of the Leased Equipment

P 35.03 The I.R.S. Ruling Guidelines

P 35.04 Tax Consequences to Lessors

P 35.05 Tax Consequences to Lessees

P 35.06 Holding Ownership Interests in Leased Property

P 35.07 Motor Vehicle Leases with Terminal Rental Adjustment Clauses

P 35.08 Cross Border Leasing Transactions

P 35.09 Tax Indemnities

P 35.10 Tax Considerations in Defaults and Workouts

Appendix A TAX INDEMNITY AGREEMENT

Appendix B SAMPLE PURCHASE AND RENEWAL OPTION PROVISIONS

Appendix C GENERAL TAX INDEMNITY PROVISION


CHAPTER 36 Captive Leasing Companies

P 36.01 Scope

P 36.02 Definition and Purpose of Captive Leasing

P 36.03 Financial Accounting Issues

P 36.04 Tax Issues

P 36.05 Legal Considerations


CHAPTER 37 Meeting the Equipment Needs of State and Local Governments With Tax-Exempt Lease Purchase Financings

P 37.01 Introduction

P 37.02 Structure of Lease Purchase Financings

P 37.03 Lease Purchase Agreements

P 37.04 State Law Considerations

P 37.05 Income Tax Considerations

P 37.06 Conclusions


CHAPTER 38 State and Local Taxation

P 38.01 Overview

P 38.02 Sales and Use Tax

P 38.03 Other State and Local Taxes

P 38.04 Sample Forms: Certificates of Exemption


Part IV Accounting

CHAPTER 39 Accounting for Leases

P 39.01 Scope of Chapter

P 39.02 Lease Accounting Theory

P 39.03 Lease Classification Criteria

P 39.04 Lessee Accounting

P 39.05 Lessor Accounting

P 39.06 Contingent Rents

P 39.07 Sale-Leaseback Arrangements

P 39.08 Leveraged Leases

P 39.09 Leases Involving Real Estate

P 39.10 Other Lease-Related Transactions

P 39.11 Financial Statement Presentation and Disclosure

P 39.12 Nonsubstantive Lessors--Synthetic Leases

P 39.13 Securitizations--FASB 125


CHAPTER 40 Lessee Concerns in Equipment Leasing

P 40.01 Overview

P 40.02 Preparation for Leasing

P 40.03 Lease Commencement Considerations

P 40.04 Lessor Responsibility

P 40.05 Equipment Use Provisions

P 40.06 Flexibility Regarding Equipment Term

P 40.07 Return Provisions

P 40.08 Equipment Casualty

P 40.09 Additional Considerations

P 40.10 Summary


Part V U.C.C. Article 2A Leases

AMENDMENTS TO UNIFORM COMMERCIAL CODE ARTICLE 2A--LEASES