Equipment Leasing

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