Glossary of Terms

Alternative Minimum Tax (AMT) - A specially calculated tax that helps ensure preference items such as accelerated depreciation do not keep taxpayers from paying their fair share of taxes.

Bargain Purchase Option - An End-of-Term option that allows Lessee to purchase the leased equipment substantially below the expected Fair Market Value.

Capital Lease - A finance Lease that meets at least one criterion outlined in Paragraph 7 of FASB 13 and is treated as a loan for accounting purposes.

Certificate of Acceptance (Certificate of Delivery and Acceptance [D&A]) - A document in which the Lessee confirms the equipment is delivered and in good working order.

Conditional Sale Lease - A Lease in which the Lessee is treated as the owner and enjoys the tax benefits of ownership.

End-of-Term Options - Available options in which a Lessee may choose to return, purchase or re-lease equipment at the end of the lease term, depending on the lease structure.

Fair Market Value - The value of the leased equipment at the end of the lease term in an arms-length transaction.

FASB 13 (FAS 13) - The abbreviation for Financial Accounting Standards Board Statement No. 13, which sets formal financial accounting standards for leases.

First Amendment Lease - A Lease that allows the Lessee to purchase the leased equipment at the higher of the minimum price or Fair Market Value.

Fixed Purchase Option - An End-of-Term option in which a Lessee may choose to purchase the leased equipment for a fixed price at the end of the lease term.

Good Faith Security Deposit - A deposit required by Lessor to cover processing costs but is applied to Rentals when transaction is funded. Typically one month's Rental.

Guarantee - a promise, usually by a related entity such as a majority owner, partnership or corporation, to uphold the terms and conditions in the Master Lease or Lease Schedule.

Hell or High Water Clause - A clause in a Lease that states the Lessee's unconditional obligation to make all lease payments.

Interim Rent - The prorated Rental that accrues from the equipment acceptance date to the base term commencement.

Lease Line - A line of credit under which a Lessee adds equipment to an established Master Lease Agreement.

Lease Rate Factor - A number expressed as a decimal or percentage of equipment cost which, when multiplied by the equipment cost, yields the lease payment.

Lease Schedule - A Lease document that is a component of a Master Lease and abides by the terms and conditions of the Master Lease.

Lessee - The entity in a Lease agreement who uses the leased equipment and pays Rentals to a Lessor.

Lessor - The entity in a Lease agreement who allows a Lessee to use the leased equipment in exchange for Rental payments.

Master Lease - A lease that establishes basic terms and conditions and governs multiple subsequent Lease Schedules.

Municipal Lease - A Lease in which a state or local government is the Lessee and earnings are tax-exempt to a Lessor.

Net Lease - A Lease in which all costs related to the use of the leased equipment are paid by the Lessee.

Off-Balance Sheet Financing - A financial structure in which an asset and its associated debt are not required to be reported on the balance sheet (i.e. an operating lease).

Operating Lease - A Lease that does not meet the criteria for a capital lease under FASB 13 and qualifies for Off-Balance Sheet Financing.

PRO Lease - A Lease in which the Lessee has the option to purchase the leased equipment or renew the Lease for a predetermined amount.

Renewal Option - An End-of-Term option which allows the Lessee to extend the lease term beyond the base term.

Rental - A payment made by the Lessee to the Lessor for the use of leased equipment.

Residual Value - The value of equipment at the expiration of the Lease term.

Sale-Leaseback - An arrangement in which a company sells equipment it owns to a third party Lessor, who in turn leases the equipment to the seller.

Soft Costs - Intangible costs, such as computer software, training and delivery.

Step Rentals - Rental rates that generally increase (but may decrease) in amount during the term of a Lease.

Tax Lease (True/Operating Lease) - A Lease that meets IRS guidelines by allowing the Lessor to claim ownership tax benefits and the Lessee to deduct the full Rental for tax purposes.

TRAC (Terminal Rental Adjustment Clause) Lease - A True Lease of motor vehicles that passes ownership to the Lessee with payment of the buyer's assumed Residual Value.

UCC Filing - Uniform Commercial Code document that protects a Lessor's interest in leased equipment.