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subordinate to GCC's lease rights and the rights of the
underlying end-user lessees.5 Petitioner's purchase of the
equipment was subject only to the underlying lessees' rights and
Elmco's rights under the Security Agreement. Also, on December
22, 1982, Elmco, pursuant to the "Collateral Assignment",
assigned its rights in petitioner's three Equity Promissory Notes
and the Buyer Acquisition Note to GCC.6
5 The Lease Agreement between GCC and petitioner contained the
following legend:
THIS LEASE AGREEMENT HAS BEEN ASSIGNED BY, AND IS
SUBJECT TO, A SECURITY INTEREST GRANTED BY, LESSOR
[Petitioner] TO SELLER [Elmco] PURSUANT TO A SECURITY
AGREEMENT DATED AS OF DECEMBER 22, 1982, AND TO A
SECURITY INTEREST GRANTED BY SELLER [Elmco] TO LESSEE
[GCC] PURSUANT TO A COLLATERAL ASSIGNMENT AGREEMENT
DATED AS OF DECEMBER 22, 1982 BETWEEN LESSEE [GCC] AND
SELLER [Elmco].
6 The Collateral Assignment provided that Elmco's assignment
of its rights in the collateral to GCC was limited as follows:
3. Security Interest Only. The rights to the
Collateral granted to the Secured Party [GCC] hereunder
shall constitute a security interest only. The Secured
Party shall not proceed against any of the Collateral, or
collect the proceeds therefrom, or exercise any other rights
hereunder with respect to the Collateral so long as the
Assignor [Elmco] is not in default hereunder. Monies
received by the Assignor from the Collateral during and
attributable to any period when the Assignor is not in
default hereunder shall be received by Assignor free and
clear of the rights of the Secured Party under this
Assignment, and the Secured Party shall have no claim to and
shall not be entitled to trace such monies in the hands of
the Assignor.
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