1
EXHIBIT 10.32
ROCKFORD LEASE FUNDING CORP.
Seller,
ROCKFORD INDUSTRIES, INC.
Servicer
and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
Trustee and Back-up Servicer
__________________________________________
POOLING AND SERVICING AGREEMENT
Dated as of March 27, 1997
__________________________________________
2
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE II
ESTABLISHMENT OF TRUST; CONVEYANCE OF TRUST ASSETS;
TITLE AND PRESERVATION OF SECURITY INTERESTS
Section 2.01 Establishment of Trust; Initial and Subsequent Closings; Conveyance
of Trust Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.02 Acceptance by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE III
ADMINISTRATION AND SERVICING
OF LEASES AND EQUIPMENT
Section 3.01 Acceptance of Appointment; Duties of Servicer . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.02 Collection of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.03 Servicer Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.04 Realization Upon Defaulted Lease Contracts . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.05 Security Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 3.06 Representations and Warranties of Servicer . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 3.07 Covenants of Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 3.08 Servicing Compensation; Payment of Expenses by Servicer . . . . . . . . . . . . . . . . . 35
Section 3.09 Monthly Statement; Annual Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 3.10 Annual Statement as to Compliance; Notice of Default . . . . . . . . . . . . . . . . . . . 36
Section 3.11 Annual Independent Public Accounts' Servicing Report . . . . . . . . . . . . . . . . . . . 36
Section 3.12 Merger or Consolidation of, or Assumption of the
Obligations of, Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 3.13 Servicer Not To Resign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 3.14 Access to Certain Documentation and Information Regarding
the Trust Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 3.15 No Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
-i-
3
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS
Section 4.01 Rights of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.02 Establishment of Lockbox Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.04 Establishment of the Class A Certificate Account . . . . . . . . . . . . . . . . . . . . . 40
Section 4.05 Letter of Credit; Cash Collateral Account . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.06 Determination of Principal Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 4.07 Determination of Interest Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 4.08 Collections and Allocations; Required Deposits . . . . . . . . . . . . . . . . . . . . . . 43
Section 4.09 Account Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 4.10 Payments under the Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 4.11 Investment of Monies Held in the Investment Account and
the Cash Collateral Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE V
DISTRIBUTIONS AND REPORTS TO
CERTIFICATEHOLDERS
Section 5.01 Distributions to Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 5.02 Annual Certificateholders' Tax Statement . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE VI
THE CERTIFICATES
Section 6.01 The Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 6.02 Authentication of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 6.03 Registration of Transfer and Exchange of Certificates . . . . . . . . . . . . . . . . . . 49
Section 6.04 Restrictions on Transfer of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 6.05 Mutilated, Destroyed, Lost or Stolen Certificates . . . . . . . . . . . . . . . . . . . . 50
Section 6.06 Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 6.07 Appointment of Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 6.08 Access to List of Certificateholders' Names and Addresses . . . . . . . . . . . . . . . . 51
Section 6.09 Authenticating Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 6.10 Non-Petition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
-ii-
4
ARTICLE VII
MATTERS RELATING
TO SELLER
Section 7.01 Representations and Warranties Regarding Seller . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE VIII
ADDITIONAL MATTERS RELATING
TO SELLER
Section 8.01 Covenants of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 8.02 Indemnification of the Trust, Trustee, Bond Insurer,
Back-up Servicer and Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 8.03 Additional Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 8.04 Servicer Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 8.05 Annual Independent Public Accountant's Servicing Report;
Annual Federal Tax Lien Search; Quarterly Re-underwriting . . . . . . . . . . . . . . . . 66
Section 8.06 Filing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 8.07 Name Change or Relocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 8.08 Chief Executive Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 8.09 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE IX
SERVICER DEFAULTS
Section 9.01 Servicer Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 9.02 Back-up Servicer to Act; Appointment of Successor . . . . . . . . . . . . . . . . . . . . 70
Section 9.03 Notification to Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 9.04 Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 9.05 Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE X
THE TRUSTEE
Section 10.01 Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 10.02 Certain Matters Affecting the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 10.03 Trustee Not Liable for Recitals in Certificates . . . . . . . . . . . . . . . . . . . . . 75
Section 10.04 Rockford to Pay Certain of Trustee's Fees and Expenses. . . . . . . . . . . . . . . . . . 75
Section 10.05 Eligibility Requirements for Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
-iii-
5
Section 10.06 Resignation or Removal of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 10.07 Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 10.08 Merger or Consolidation of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 10.09 Appointment of Co-Trustee or Separate Trustee . . . . . . . . . . . . . . . . . . . . . . 77
Section 10.10 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 10.11 Trustee May Enforce Claims Without Possession of Certificates . . . . . . . . . . . . . . 79
Section 10.12 Suits for Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 10.13 Rights of Bond Insurer to Direct Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 10.14 Representations and Warranties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . 80
Section 10.15 Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Section 10.16. Servicer Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 10.17. Review of Lease Files . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
ARTICLE XI
TERMINATION
Section 11.01 Termination of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 11.02 Optional Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 11.03 Final Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 12.02 Protection of Right, Title and Interest to Trust Assets . . . . . . . . . . . . . . . . . 84
Section 12.03 Limitation on Rights of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 12.04 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 12.05 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 12.06 Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 12.07 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 12.08 Certificates Nonassessable and Fully Paid . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 12.09 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 12.10 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 12.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 12.12 Third-Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 12.13 Actions by Certificateholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 12.14 Intention of Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 12.15 Merger and Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 12.16 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 12.17 Certificates and Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 12.18 Bond Insurer Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
-iv-
6
Section 12.19 Non-Petition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
EXHIBITS:
Exhibit A: Form of Class A Certificate
Exhibit B: [Reserved]
Exhibit C: Form of Seller Certificate
Exhibit D: Form of Monthly Statement
Exhibit E: Form of Lease Schedule
Exhibit F: Transfer Certificate
Exhibit G: Form of Lease File Review Certificate
Exhibit H: Form of Supplemental Grant of Substitute Lease Contracts
SCHEDULES:
Schedule 3.01(b): Servicing Procedures
Schedule 9.02: Back-up Servicer Plan
-v-
7
POOLING AND SERVICING AGREEMENT
THIS POOLING AND SERVICING AGREEMENT, entered into and dated as of
March 27, 1997 (as hereinafter amended and supplemented, this "Agreement"), is
by and among ROCKFORD LEASE FUNDING CORP., a New York corporation, as "Seller"
hereunder, ROCKFORD INDUSTRIES, INC., a California corporation ("Rockford"), as
"Servicer" hereunder, TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national
banking association organized and existing under the laws of the United States
of America ("Trustee" or "Back-up Servicer"), as "Trustee" and "Back-up
Servicer" and as the initial "Transfer Agent and Registrar" and "Paying Agent"
hereunder.
RECITALS
Seller, Rockford, Trustee and Back-up Servicer are entering into this
Agreement for the following purposes:
(a) To effect the creation of the Rockford Lease Backed Trust
1997-1.
(b) To acknowledge the transfer from time to time by Seller to the
Trust of the Trust Assets.
(c) To provide for the issuance by the Trust to or upon the order
of Seller from time to time of various certificates evidencing the ownership of
undivided interests in the Trust.
(d) To provide for the appointment of Rockford as Servicer
hereunder and to delineate the duties and responsibilities of Rockford in such
capacity.
(e) To provide for such other matters as are set forth herein.
Now Therefore, in consideration of the premises, the mutual covenants
and agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, each party agrees as
follows for the benefit of the other parties and for the benefit of the
Certificateholders and Bond Insurer:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. Whenever used in this Agreement,
the following words and phrases shall have the respective meanings indicated
below:
"Accounts" shall mean each of the Lockbox Account, the
Investment Account, the Class A Certificate Account and the Cash
Collateral Account.
8
"Accrual Date" shall mean, with respect to any Certificate,
the date upon which interest begins accruing on such Certificates, as
specified in such Certificate, which will be March 31, 1997 with
respect to the Certificates issued on the Initial Closing Date.
"Accrual Interval" shall mean, with respect to each Accrual
Period other than the Accrual Period relating to the Initial Payment
Date, each period beginning on a Payment Date (or with respect to any
Certificates issued on a Subsequent Closing Date during such Accrual
Period, the related Subsequent Closing Date) and ending on the day
immediately prior to the earlier of the next Subsequent Closing Date
or Payment Date, as appropriate. The Accrual Interval with respect to
the Accrual Period relating to the Initial Payment Date shall be the
period beginning on the Accrual Date (or with respect to any
Certificates issued on a Subsequent Closing Date during such Accrual
Period, the related Subsequent Closing Date) and ending on the day
immediately prior to the earlier of the next Subsequent Closing Date
or the Initial Payment Date, as appropriate. Each Accrual Period may
consist of multiple Accrual Intervals.
"Accrual Period" shall mean the period beginning on the
twentieth (20th) day of each month (or, in the case of the Accrual
Period that is applicable to the Initial Payment Date, beginning on
the Accrual Date for such Certificates) and ending on the nineteenth
(19th) day of the immediately following month.
"Additional Servicer Fee" shall mean the amount, if any, of
the fee payable in accordance herewith to a Successor Servicer
appointed pursuant to Section 9.02(a) that is in excess of the
Servicer Fee.
"Affiliate" of any Person shall mean any other Person directly
or indirectly controlling, controlled by or under common direct or
indirect control with the first Person. The Trust shall not be deemed
an Affiliate of Seller, Rockford or Trustee.
"Aggregate Discounted Lease Contract Balance" shall mean at
any time of determination, an amount equal to the sum of the
Discounted Lease Contract Balances of the Lease Contracts.
"Annualized Default Rate" shall mean for any Collection
Period, (i) the sum of the Discounted Lease Contract Balances as of
the last day of such Collection Period of all Lease Contracts that
became Defaulted Lease Contracts during such Collection Period
(including any Lease Contracts that have been purchased or
substituted), (ii) minus the sum of Recoveries and Residual Proceeds
received during such Collection Period, (iii) divided by (A) during
the Funding Period, the Aggregate Discounted Lease Contract Balance as
of the last day of the third preceding Collection Period or (B) after
the Funding Period has terminated, the Aggregate Discounted Lease
Contract Balance as of the last day of such Collection Period, (iv)
multiplied by twelve.
-2-
9
"Applicants" shall have the meaning specified in Section 6.08.
"Application for Certificate of Title" shall mean, with regard
to each Vehicle for which a Certificate of Title has not been issued
naming Seller as owner and the Trustee as secured party, evidence that
an application for a Certificate of Title naming Seller as owner and
Trustee as secured party has been submitted with the appropriate
authority.
"Authorized Denominations" as related to the Class A
Certificates, shall mean $100,000 or any integral multiple thereof;
provided, however, that if on any Closing Date the aggregate principal
balance of the Class A Certificates is not an integral multiple of
$100,000, then one Certificate may be issued that is not an integral
multiple of $100,000.
"Available Amount" shall mean, as of any date of
determination, the sum of (i) the Available LOC Amount (as defined in
the Letter of Credit Reimbursement Agreement) and (ii) the amount on
deposit in the Cash Collateral Account (in each case as of such date
of determination).
"Back-up Servicer" shall mean the institution executing this
Agreement as Back-up Servicer or any successor back-up servicer
appointed as herein provided.
"Back-up Servicer Fee" shall mean an amount, for each Payment
Date, equal to one-twelfth (1/12th) of 0.025% of the aggregate of the
Certificate Balances of all outstanding Certificates as of the first
day of the Collection Period immediately preceding such Payment Date.
"Blended Class A Interest Shortfall Rate" shall mean, as of
the close of business on any Payment Date, the weighted average of the
Certificate Rates for each of the Class A Certificates that have been
issued and are outstanding.
"Bond Insurer" shall mean MBIA Insurance Corporation, and its
permitted successors and assigns.
"Bond Insurer Default" shall mean the occurrence and
continuance of any of the following events:
(a) the failure by the Bond Insurer to make a
payment under the Policy in accordance with its terms; or
(b) an Insurer Insolvency.
"Bond Insurer Premium" shall have the meaning set forth in the
Insurance Agreement.
-3-
10
"Bond Insurer Premium Rate" shall have the meaning set forth
in the Insurance Agreement.
"Business Day" shall mean any day other than a Saturday,
Sunday or a day on which Bond Insurer or banking institutions in New
York, New York or Houston, Texas are authorized or obligated by law or
executive order to be closed.
"Cash Collateral Account" shall mean the trust account
designated as such, established and maintained pursuant to Section
4.05(d).
"Cash Collateral Withdrawal" shall have the meaning specified
in Section 4.05(d).
"Centre Square" shall mean Centre Square Funding Corporation,
a Delaware corporation.
"Certificate" shall mean any one of the Class A Certificates.
"Certificate Balance" shall mean with respect to each
Certificate, on any date of determination, an amount equal to (a) the
original principal amount of such Certificate minus (b) the aggregate
amount of principal distributions in respect of such Certificate made
pursuant to Section 5.01.
"Certificateholder" or "Holder" shall mean the record holder
of a Certificate as shown on the Certificate Register; provided,
however, that, solely for the purposes of giving any consent, waiver,
request or demand pursuant to this Agreement, any Certificate
registered in the name of Seller, Rockford, Trustee or any of their
respective Affiliates shall be disregarded.
"Certificate of Title" shall mean, with regard to each
Vehicle, the original certificate of title relating thereto, which
shall name Seller as the owner of such Vehicle and Trustee as secured
party.
"Certificate Rate" shall mean with respect to each Class A
Certificate issued on any Closing Date, the per annum rate of interest
for such Certificate (calculated on the basis of a 360 day calendar
year) determined pursuant to the Purchase Agreement and set forth on
the face of such Certificate.
"Certificate Register" shall mean the register maintained by
the Trustee pursuant to Section 6.03, providing for the registration
of the Certificates and transfers and exchanges thereof.
-4-
11
"Class A Certificate" shall mean any one of the certificates
authenticated by the Trustee and substantially in the form attached
hereto as Exhibit A.
"Class A Certificate Account" shall mean the account
designated as such, established and maintained pursuant to
Section 4.04(a).
"Class A Certificate Distributable Amount" shall mean, for any
Payment Date, an amount equal to the sum, without duplication, of the
Class A Certificate Interest Distributable Amount, the Class A
Certificate Interest Shortfall Carryover, the Class A Certificate
Principal Distributable Amount and the Class A Certificate Principal
Shortfall Carryover.
"Class A Certificate Interest Distributable Amount" shall have
the meaning specified in Section 4.07(a).
"Class A Certificate Interest Shortfall Carryover" shall mean,
as of the close of business on any Payment Date, the sum of (a) the
excess of (i) the Class A Certificate Interest Distributable Amount
for such Payment Date plus any outstanding Class A Certificate
Interest Distributable Amount which remains unpaid from any preceding
Payment Date, over (ii) the sum of the amount of interest actually
deposited in the Class A Certificate Account on the related Deposit
Date pursuant to Section 4.08(b)(viii), plus (b) interest on such
excess, to the extent permitted by law, at the Blended Class A
Interest Shortfall Rate from such Payment Date through the immediately
succeeding Payment Date.
"Class A Certificate Investor Interest" shall mean, as of any
Payment Date, an amount equal to the Initial Class A Certificate
Investor Interest minus the aggregate amount of payments of principal
distributed to the Holders of the Class A Certificates pursuant to
Section 5.01 on or prior to such Payment Date.
"Class A Certificate Principal Distributable Amount" shall
have the meaning specified in Section 4.06(a).
"Class A Certificate Principal Shortfall Carryover" shall
mean, as of the close of business on any Payment Date, the excess of
(a) the Class A Certificate Principal Distributable Amount for such
Payment Date plus any outstanding Class A Certificate Principal
Distributable Amount which remains unpaid from any preceding Payment
Date over (b) the sum of the amount of principal actually deposited in
the Class A Certificate Account on the related Deposit Date pursuant
to Section 4.08(b)(ix).
"Closing Date" shall mean the Initial Closing Date and each
Subsequent Closing Date, as the context requires.
-5-
12
"Collection Period" shall mean with respect to each Payment
Date, the period commencing on the first day of the calendar month
immediately preceding the month in which such Payment Date occurs and
ending on the close of business on the last day of such preceding
calendar month.
"Collections" shall mean, with respect to any Collection
Period, all payments and recoveries received and made during such
Collection Period relating to the Trust Assets or the Equipment
including, but not limited to, (a) all proceeds realized in connection
with the early termination of a Lease Contract and all early
termination payments made by the Lessee under a Lease Contract, (b)
any and all proceeds realized from the sale, re-lease or other
remarketing of the Equipment, (c) prepayments, early payments and late
payments, (d) Scheduled Payments, (e) Purchase Amounts, (f) Insurance
Proceeds, (g) any Guaranty Amounts, (h) Recoveries, (i) Residual
Proceeds and (j) Overdue Payments.
"Corporate Trust Office" shall mean the principal office of
Trustee at which at any particular time its corporate trust business
shall be principally administered, which office at the date of the
execution of this Agreement is located at 000 Xxxxxx, 0xx Xxxxx,
Xxxxxxx, Xxxxx 00000, Attention: Global Trust Services -- Rockford
1997-1.
"Cut-Off Date" shall mean (i) with respect to the Initial
Closing Date, April 1, 1997 and (ii) with respect to each Subsequent
Closing Date, the "Cut-Off Date" for Lease Contracts sold to the Trust
on such Subsequent Closing Date as determined pursuant to the Purchase
Agreement and specified in the Sale Assignment covering such Lease
Contracts.
"Debt" of any Person shall mean (a) indebtedness of such
Person for borrowed money, (b) obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (c) obligations
of such Person to pay the deferred purchase price of property or
services, (d) obligations of such Person as lessee under leases which
have been or should be, in accordance with generally accepted
accounting principles, recorded as capital leases, (e) obligations
secured by any Lien upon property or assets owned by such Person, even
though such Person has not assumed or become liable for the payment of
such obligations, (f) obligations of such Person under direct or
indirect guaranties in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise to assure a
creditor against loss in respect of, indebtedness or obligations of
others of the kinds referred to in clauses (a) through (e) above, and
(g) liabilities in respect of unfunded vested benefits under plans
covered by Title IV of ERISA.
"Defaulted Lease Contract" shall mean a Lease Contract as to
which Servicer has reasonably determined, in accordance with its
customary servicing procedures, that it shall not make a Servicer
Advance or that a prior Servicer Advance is unrecoverable; provided,
each Lease Contract as to which the Lessee thereunder is delinquent in
any portion of the Scheduled Payments for a period of 120 days or more
shall automatically be deemed a Defaulted Lease Contract.
-6-
13
"Delinquency Rate" shall mean, for any Collection Period, the
sum of the Discounted Lease Contract Balances of all Lease Contracts
as of the last day of such Collection Period with respect to which a
Lessee is more than 30 days delinquent in making the Scheduled Payment
or any portion thereof due during such Collection Period (including
any such Lease Contracts that have been purchased or substituted),
divided by the Aggregate Discounted Lease Contract Balance as of the
last day of such Collection Period (including any such Lease Contracts
that have been purchased or substituted).
"Deposit Date" shall mean, with respect to each Collection
Period, the Business Day immediately preceding the related Payment
Date.
"Determination Date" shall mean the second Business Day
preceding each Deposit Date.
"Discounted Lease Contract Balance" shall mean, with respect
to each Lease Contract, at any time of determination, the present
value calculated at the applicable Discount Pool Rate of all of the
remaining Scheduled Payments (including, without limitation, those
that are past due, but excluding any Scheduled Payment for which a
Servicer Advance has been made) constituting the Lease Contract
Balance of such Lease Contract; provided, however, that any Lease
Contact with a deferral period shall include such deferral period in
the calculation of such present value; provided, further, however,
that the Discounted Lease Contract Balance of any Lease Contract that
is a Defaulted Lease Contract (except for purposes of calculating the
Annualized Default Rate), Early Termination Lease Contract or Expired
Lease Contract at such time shall be equal to zero.
"Discount Pool Rate" shall mean as to all Lease Contracts
purchased by the Trust on a particular Closing Date, the Certificate
Rate for all Class A Certificates issued on such Closing Date, plus
0.8375% (such percentage being the sum of the Servicing Fee rate, the
Bond Insurer Premium Rate, the Trustee Fee rate and the Back-up
Servicer Fee rate), and for purposes of this Agreement the resulting
rate shall be calculated on the basis of a 360 day year and on actual
days elapsed.
"Draw Amount" shall have the meaning specified in Section
4.05(b).
"Draw Down Date" shall have the meaning specified in Section
4.05(f).
"Early Termination Lease Contract" shall mean any Lease
Contract that has terminated prior to its Scheduled Expiration Date
and with respect to which the related Repurchase Price has been
deposited into the Investment Account.
"Eligible Institution" means (a) a depository institution or
trust company whose long-term unsecured debt obligations are rated at
least A by Standard & Poor's and A2 by Moody's, or (b) a federal or
state chartered depository institution with accounts subject to
-7-
14
regulations regarding fiduciary funds on deposit substantially similar
to 12 C.F.R. Section 9.10(b).
"Eligible Investments" shall mean:
(a) negotiable instruments or securities
represented by instruments in bearer or registered or in
book-entry form which evidence (i) direct obligations fully
guaranteed by the United States of America; (ii) demand
deposits or time deposits in, certificates of deposits of, or
bankers' acceptances issued by, any depository institution or
trust company incorporated under the laws of the United States
of America or any state thereof and subject to supervision and
examination by Federal or state banking or depository
institution authorities, provided, however, that at the time
of the Trust's investment or contractual commitment to invest
therein, (x) the certificates of deposit or short-term
deposits, if any, of such depository institution or trust
company shall have a credit rating from Moody's and Standard &
Poor's of P-1 and A-1+, respectively, or (y) such time
deposits are fully insured by the Federal Deposit Insurance
Corporation; or (iii) investments in money market funds rated
in the highest investment category by Moody's and Standard &
Poor's at the time of the Trust's rating therein or otherwise
approved in writing by each Rating Agency and Bond Insurer;
(b) demand deposits in the name of the Trust
or the Trustee in any depository institution or trust company
referred to in (a) (ii) above;
(c) commercial paper (having original or
remaining maturities of no more than 270 days) having, at the
time of the Trust's investment or contractual commitment to
invest therein, a credit rating from Moody's and Standard &
Poor's of P-1 and A-1+, respectively;
(d) repurchase obligations with a term not to
exceed thirty (30) days with respect to any security described
in clause (a)(i) above and entered into with a depository
institution, trust company or corporation (acting as
principal) rated in the highest available short term rating
category of each Rating Agency at the time of such investment;
provided, however, that collateral transferred pursuant to
such repurchase obligation must be of the type described in
clause (a)(i) above and must (A) be valued daily at current
market price plus accrued interest, (B) pursuant to such
valuation, equal, at all times, to 105% of the cash
transferred by Trustee in exchange for such collateral and (C)
be delivered to Trustee or an agent for Trustee, in such a
manner as to accomplish perfection of a security interest in
the collateral by possession of certificated securities; and
(e) any investment approved in writing by
Bond Insurer and each Rating Agency.
-8-
15
Eligible Investments shall be held to maturity and shall mature no
later than the Deposit Date immediately preceding the Payment Date
next following the Collection Period during which such investment was
made. Eligible Investments otherwise meeting the definition thereof
may include, without limitation, those investments for which the
Trustee or an Affiliate of the Trustee provides services.
"Eligible Lease Contract" shall have the meaning set forth in
the Purchase Agreement.
"Equipment" shall mean the equipment or other property
(including Vehicles) leased pursuant to or otherwise covered by a
Lease Contract.
"Equipment and Lease Purchase Agreement" shall mean the
Equipment and Lease Purchase Agreement of even date herewith, between
Rockford and Seller.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"Expired Lease Contract" shall mean any Lease Contract that
has terminated on its Scheduled Expiration Date and with respect to
which the related Repurchase Price has been deposited into the
Investment Account.
"FDIC" shall mean the Federal Deposit Insurance Corporation,
or its successors and assigns.
"Fiscal Year" shall mean the 12 month period ending on
December 31st of each year.
"Funding Period" shall mean the period commencing on the
Closing Date through and including the earliest to occur of (i) a
Funding Period Trigger Event, (ii) September 20, 1998, unless extended
by mutual agreement among Seller, Bond Insurer and the
Certificateholders; provided that each Rating Agency receives
notification of such extension, (iii) the date designated by Seller
upon at least five (5) Business Days prior written notice to the
Certificateholders and Bond Insurer or (iv) the date on which the
Liquidity Facility is terminated.
"Funding Period Trigger Event" shall have the meaning
specified in the Purchase Agreement.
"Governmental Authority" shall mean the United States of
America, any state or other political subdivision thereof, any court
and any entity exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government.
-9-
16
"Guaranty Amounts" shall mean any and all amounts paid or
payable by any individual guarantor indicated on the applicable Lease
Contract.
"Independent Director" shall mean at any particular time, any
person who (A) is not then, and for five (5) years prior thereto has
not been, (1) a shareholder, officer, director, partner or employee or
a significant customer, creditor, supplier or independent contractor
of Seller, its ultimate parent or any subsidiaries or Affiliates
thereof, or (2) a member of the immediate family of any person
described in clause (A)(1) hereof, and (B) does not directly or
indirectly own any class of voting stock of Seller or any of its
Affiliates; provided, however, that an Independent Director may also
be, or within the prior five (5) years have been, an independent
director of any one or more special purpose corporate subsidiaries of
Rockford.
"Independent Public Accountants" means any nationally
recognized certified public accounting firm; provided, that such firm
is independent with respect to the Servicer within the meaning of the
Securities Act and is reasonably acceptable to Bond Insurer.
"Initial Aggregate Certificate Principal Balance" shall mean
on any date, the aggregate original principal balance of all
Certificates issued on or prior to such date.
"Initial Closing Date" shall mean the date of this Agreement.
"Initial Payment Date" shall mean May 20, 1997.
"Insurance Agreement" shall mean the Insurance Agreement,
dated as of March 27, 1997, by and among Bond Insurer, Seller,
Rockford, Trustee and Back-up Servicer.
"Insurance Policy" shall mean, with respect to any Lease
Contract and Equipment, any insurance policy, whether covering
casualty or physical damage to the related Equipment, or insurance for
any other purpose.
"Insurance Proceeds" shall mean any payments made to the
Seller, Servicer or Trustee under an Insurance Policy.
"Insurer Insolvency" shall have the meaning set forth in the
Insurance Agreement.
"Internal Revenue Code" shall mean the Internal Revenue Code
of 1986, as amended from time to time.
"Investment Account" shall mean the account designated as such
for the deposit of Collections, established and maintained pursuant to
Section 4.03.
-10-
17
"Investment Company Act" shall mean the Investment Company Act
of 1940, as amended.
"Late Payment Rate" shall have the meaning specified in the
Insurance Agreement.
"Lease Contract" shall mean each equipment lease, note and
security agreement, conditional sale agreement, loan agreement, note
or other instrument listed on the Lease Schedule or otherwise assigned
and transferred pursuant to each Sale Assignment or which is a
Substitute Lease Contract and any amendments, riders and annexes
thereto.
"Lease Contract Balance" shall mean, with respect to each
Lease Contract at any time of determination, an amount equal to the
aggregate of all past due and unpaid Scheduled Payments and remaining
Scheduled Payments to be paid on such Lease Contract in accordance
with its terms, as such amount shall be reduced from time to time to
give effect to any Prepayments made with respect to such Lease
Contract.
"Lease File" shall mean with respect to each Lease Contract,
(a) the original manually executed Lease Contract that constitutes
"chattel paper" for purposes of the UCC, (b) if required hereunder,
file-stamped copies of UCC-1 financing statements showing the Lessee
as debtor/lessee, Rockford as secured party/lessor, and the Equipment
covered by the Lease Contract as collateral, which were filed in all
appropriate locations in the states in which such Equipment is
located, (c) a certified copy of any related master lease agreement,
(d) an original certificate of acceptance (and, with respect to Lease
Contracts originated on the form attached to the Equipment and Lease
Purchase Agreement as Exhibit D-1, an amended certificate of
acceptance in the form attached to the Equipment and Lease Purchase
Agreement as Exhibit E) and delivery of the Equipment covered by the
Lease Contract properly executed by the Lessee, (e) a certificate
evidencing that the insurance required to be carried under the Lease
Contract is in full force and effect, (f) the original Certificate of
Title or Application for Certificate of Title and (g) all other
instruments and documents directly relating to such Lease Contract or
Equipment, including, without limitation, all other security and
books, records and computer tapes related to the foregoing.
"Lease Management System" shall mean the computerized
electronic lease management system maintained by Servicer for the
Lease Contracts.
"Lease Receivables" shall mean, with respect to any Lease
Contract, all of, and the right to receive all of, (i) the Scheduled
Payments, (ii) any Guaranty Amounts, (iii) any Insurance Proceeds,
(iv) any Residual Proceeds, (v) any Recoveries and (vi) any
Liquidation Proceeds.
"Lease Schedule" shall mean a Schedule of all of the Lease
Contracts constituting part of the Trust Assets, and shall consist of
the Schedule attached to this Agreement on the
-11-
18
Closing Date and to each Sale Assignment delivered on each Subsequent
Closing Date. The Lease Schedule will be in the form attached hereto
as Exhibit E.
"Lessee" shall mean with respect to each Lease Contract, the
Person or Persons obligated to make payments with respect to such
Lease Contract, including any guarantor thereof.
"Letter of Credit" shall mean the letter of credit issued by
the Letter of Credit Bank pursuant to the Letter of Credit
Reimbursement Agreement.
"Letter of Credit Bank" shall mean CoreStates Bank, N.A. (or
any successor thereto satisfactory to Bond Insurer) pursuant to the
Letter of Credit Reimbursement Agreement.
"Letter of Credit Commitment" shall have the meaning set forth
in the Letter of Credit Reimbursement Agreement.
"Letter of Credit Reimbursement Agreement" shall mean the
letter of credit reimbursement agreement dated as of March 27, 1997
between Letter of Credit Bank and Rockford (or any replacement
therefor satisfactory to Bond Insurer).
"Lien" shall mean any security interest, mortgage, deed of
trust, charge, pledge, hypothecation, assignment, deposit arrangement,
equity, encumbrance, lien (statutory or other), preference, priority
or other security agreement or preferential arrangement of any kind or
nature whatsoever, including, without limitation, any conditional sale
or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing and the
filing of any financing statement under the UCC (other than any such
financing statement filed for informational purposes only) or
comparable law of any jurisdiction to evidence any of the foregoing.
"Liquidation Expenses" shall mean with respect to a Defaulted
Lease Contract, in keeping with Servicer's customary procedures and
the Servicing Procedures, fees and expenses incurred by Servicer in
connection with the collection, repossession (including litigation
costs), refurbishing and disposition of the Equipment and other
out-of-pocket costs related to the liquidation.
"Liquidation Proceeds" shall mean an amount, set forth in the
Monthly Statement with respect to the related Collection Period, with
respect to a Defaulted Lease Contract, in keeping with Servicer's
customary procedures, proceeds from the sale or other disposition of
the Equipment, damages for breach of contract, and any other
recoveries with respect to such Defaulted Lease Contract and the
related Equipment, net of Liquidation Expenses.
-12-
19
"Liquidity Facility" shall mean the liquidity facility
established pursuant to that certain liquidity agreement dated as of
March 27, 1997 by and among CoreStates Bank, N.A., as liquidity agent
and the liquidity banks named as parties thereto.
"Lockbox Account" shall mean the account designated as such,
established and maintained pursuant to Section 4.02.
"Lockbox Account Bank" shall have the meaning specified in
Section 4.02.
"Lockbox Agreement" shall have the meaning specified in
Section 4.02.
"Lockbox Servicer" shall have the meaning specified in Section
4.02.
"Majority Certificateholders" shall mean the Holders of Class
A Certificates aggregating not less than 51% of the Class A
Certificate Investor Interest.
"Minimum LOC Amount" shall mean, as of any date of
determination, the greatest of (i) (A) if such date of determination
occurs during the Funding Period, the sum of (1) 8.50% of the Class A
Certificate Investor Interest and (2) all Residual Proceeds received
on or prior to such date of determination, but in no event greater
than 10% of the Class A Certificate Investor Interest or (B) if such
date of determination occurs following the termination of the Funding
Period, 8.50% of the Class A Certificate Investor Interest, (ii) the
lesser of (A) 5.00% of the highest Class A Certificate Investor
Interest as of any prior Closing Date and (B) $2,000,000.00 and (iii)
the Aggregate Discounted Lease Contract Balance of the Lease Contracts
relating to the Lessees having the three highest total Discounted
Lease Contract Balances.
"Monthly Statement" shall mean the statement required to be
prepared by Servicer on a monthly basis pursuant to Section 3.09,
substantially in the form attached hereto as Exhibit D.
"Moody's" shall mean Xxxxx'x Investor Service, Inc. and any
successor thereof.
"Officer's Certificate" shall mean a certificate signed by any
Vice President or more senior officer of Seller or Servicer (as
applicable) and delivered to Trustee and Bond Insurer.
"Opinion of Counsel" shall mean a written opinion of outside
counsel which shall be reasonably satisfactory to Trustee and Bond
Insurer in form and substance acceptable to Trustee and Bond Insurer.
"Optional Purchase Amount" shall have the meaning specified in
Section 11.02.
-13-
20
"Other Class A Principal Amount" shall mean, with respect to
any Payment Date, the amount, if any, deposited into the Class A
Certificate Account on the related Deposit Date pursuant to Section
4.08(b)(xiii). On any Payment Date, the Class A Certificate Investor
Interest shall be reduced to the extent of any Other Class A Principal
Amount distributed to the Class A Certificateholders pursuant to
Section 5.01(a)(ii).
"Overdue Payments" shall mean, with respect to any Lease
Contract, all amounts received during any Collection Period which
represent late payments or collections of Scheduled Payments due but
delinquent for a previous Collection Period and not previously
received.
"Paying Agent" shall mean any paying agent appointed pursuant
to Section 6.07.
"Payment Date" shall mean with respect to each Collection
Period, the twentieth (20th) day of the calendar month following such
Collection Period, or, if such day is not a Business Day, the next
succeeding Business Day.
"Person" shall mean any legal person, including any
individual, corporation, partnership, joint venture, association,
joint- stock company, trust (or beneficiary thereof), unincorporated
organization, governmental entity or other entity of similar nature.
"Policy" shall mean, with respect to the Class A Certificates,
the financial guaranty insurance policy issued by Bond Insurer
insuring the Class A Certificates in accordance with the terms
thereof.
"Post Office Lockbox" shall have the meaning specified in
Section 4.02.
"Preference Claim" shall have the meaning set forth in Section
4.10 hereof.
"Prepayment" shall mean, for each Lease Contract, (a) any
payment by the Lessee of a Scheduled Payment (or a portion thereof)
due after the Collection Period during which such payment is made and
(b) in the case of a Lease Contract repurchased by Seller pursuant to
Section 7.01 of the Purchase Agreement, the payment of the Warranty
Purchase Amount.
"Prepayment Penalty" shall mean the greater of (i) the product
of (a) the related Certificate Rate less the interpolated (based on
the original weighted average life of the related Class A Certificate)
Treasury Rate as of the Determination Date in the next succeeding
month less 0.40% and (b) the Discounted Lease Contract Balance of the
related Lease Contract and (ii) zero.
"Principal Agreements" shall mean this Agreement, the
Equipment and Lease Purchase Agreement, the Insurance Agreement, the
Purchase Agreement, each Sale
-14-
21
Assignment, the Capital Contribution Agreement, the Letter of Credit
Reimbursement Agreement and the Lockbox Agreements.
"Purchase Agreement" shall mean the Purchase Agreement dated
as of date hereof, by and among Seller, Rockford, Trustee and Centre
Square.
"Purchase Amount" shall mean either the Warranty Purchase
Amount or the Optional Purchase Amount, as applicable.
"Rating Agencies" shall mean Moody's and Standard & Poor's.
"Record Date" shall mean with respect to any Payment Date, the
last day of the immediately preceding calendar month or, with respect
to the Initial Payment Date, the Initial Closing Date.
"Recoveries" shall mean, with respect to the period occurring
after the date on which any Lease Contract becomes a Defaulted Lease
Contract and with respect to such Defaulted Lease Contract, all
payments that Servicer received from or on behalf of a Lessee during
such period in respect of such Defaulted Lease Contract or from
liquidation or re-leasing of the related Equipment, including but not
limited to Liquidation Proceeds, Scheduled Payments, Overdue Payments,
Guaranty Amounts, and Insurance Proceeds, as reduced by (i) any
unreimbursed Servicer Advances with respect to such Lease Contract and
(ii) any reasonably incurred out-of-pocket expenses incurred by
Servicer in enforcing such Defaulted Lease Contract.
"Repurchase Price" shall have the meaning given to such term
in the Equipment and Lease Purchase Agreement.
"Requirements of Law" for any Person shall mean requirements
arising under any law, treaty, rule or regulation, or determination of
an arbitrator or Governmental Authority, in each case applicable to or
binding upon such Person or to which such Person is subject, whether
Federal, state or local.
"Requisite LOC Amount" shall mean, (i) as of any date of
determination during the Funding Period, the sum of (A) 8.50% of the
Class A Certificate Investor Interest and (B) all Residual Proceeds
received on or prior to such date of determination, but in no event
greater than 10% of the Class A Certificate Investor Interest and (ii)
as of any date of determination following the termination of the
Funding Period, 10.00% of the Class A Certificate Investor Interest
and (iii) after the occurrence of a Trigger Event set forth in clause
(1) of the definition thereof, 20% of the Class A Certificate Investor
Interest; but in no event less than the Minimum LOC Amount.
-15-
22
"Residual Proceeds" shall mean, with respect to a Lease
Contract that is not a Defaulted Lease Contract and the related
Equipment, the net proceeds (including Insurance Proceeds) of any
sale, re-lease (including any lease renewal) or other disposition of
the related Equipment after receipt of all Scheduled Payments.
"Responsible Officer" shall mean any officer of Trustee
assigned to and working in Trustee's Corporate Trust Department.
"Rockford" shall mean Rockford Industries, Inc., a California
corporation.
"Sale Assignment" shall have the meaning ascribed to such term
in the Purchase Agreement.
"Scheduled Expiration Date" shall mean with respect to each
Lease Contract the date on which such Lease Contract is scheduled to
expire by its terms.
"Scheduled Payment" shall mean, with respect to each Lease
Contract, each regularly scheduled rental payment (or installment of
principal and interest) and any fixed residual payments required to be
made by the Lessee under the terms of such Lease Contract. Such term
shall not include any Security Deposit, any payment in respect of Tax
Amounts, any payment in respect of the placement, maintenance or
service of insurance under the terms of the Lease Contract or any
amounts due to a third party.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Security Deposit" shall mean all security deposit amounts,
certificates of deposit and similar credit supports in respect of the
Lease Contracts transferred to Trustee from time to time or, if
physical possession of the same is not transferred to Trustee, all
right, title and interest in respect of the same transferred by
Rockford to Seller.
"Seller" shall mean Rockford Lease Funding Corp., a New York
corporation.
"Seller Amounts" shall mean the amounts described as such in
Sections 4.05(h) and 4.08(b)(xv) hereof.
"Seller Certificate" shall mean the certificate authenticated
by Trustee and substantially in the form attached hereto as Exhibit C.
"Servicer" shall mean initially Rockford, and thereafter any
Person appointed as Successor Servicer pursuant to the terms of this
Agreement.
"Servicer Advance" shall mean an advance of Scheduled Payments
made by the Servicer pursuant to Section 3.03.
-16-
23
"Servicer Default" shall have the meaning specified in Section
9.01.
"Servicing Fee" shall mean an amount, for each Deposit Date,
equal to one-twelfth (1/12th) of 0.50% of the aggregate of the
Certificate Balances of all outstanding Certificates as of the first
day of the Collection Period immediately preceding such Deposit Date.
"Servicing Officer" shall mean any representative of Servicer
involved in, or responsible for, the administration and servicing of
the Lease Contracts whose name appears on a list of servicing officers
furnished to Trustee and Bond Insurer by Servicer, as such list may
from time to time be amended.
"Servicing Procedures" shall mean the servicing procedures of
the Servicer set forth on Schedule 3.01(b) hereto.
"Standard & Poor's" shall mean Standard and Poor's Ratings
Services, a division of The XxXxxx-Xxxx Companies, Inc., and any
successor thereof.
"Stated Maturity" shall mean the Payment Date in the
Collection Period which is six months following the Collection Period
in which the final Scheduled Payment is due with respect to the Lease
Contract funded prior to the end of the Funding Period with the
longest original term.
"Subsequent Closing Date" shall mean each date upon which
Seller shall transfer, assign, set over and otherwise convey Lease
Contracts to the Trust as contemplated by Section 2.01(c).
"Substitute Lease Contract" shall mean any Lease Contract
substituted pursuant to Section 2.03.
"Substitution Criteria" shall be satisfied with respect to any
Substitute Lease Contract if such Substitute Lease Contract shall (i)
be an Eligible Lease Contract; (ii) be with respect to types of
Equipment and type of Leases represented in the pool of Lease
Contracts previously pledged to the Trustee pursuant to this
Agreement; (iii) be with a Lessee whose credit is equal to or better
than that of the Lessee under the withdrawn Lease Contract; (iv) be
accompanied by a supplement to this Agreement substantially in the
form of Exhibit H hereto subjecting such Lease Contract to the
provisions hereof and providing with respect to such Substitute Lease
Contract the information required in the Lease Schedule; (v) not have
been selected using procedures that identified the Lease Contracts as
being less desirable or valuable than other comparable equipment
leases owned by Rockford; (vi) have a Discounted Lease Contract
Balance at least equal to the Discounted Lease Contract Balance of the
Lease Contract being withdrawn; and (vii) have a remaining term that
is not later than the remaining term of the Lease Contract being
withdrawn.
-17-
24
"Successor Servicer" shall have the meaning specified in
Section 9.02.
"Tangible Net Worth Requirement" shall mean the requirement
that with respect to Servicer:
(a) the total assets of Servicer and its
Affiliates which would be shown as assets on a consolidated
balance sheet of Servicer and its Affiliates as of such time
prepared in accordance with generally accepted accounting
principles consistently applied after eliminating all amounts
properly attributable to minority interests, if any, in the
stock and surplus of the Affiliates, minus
(b) the total liabilities of Servicer and its
Affiliates which would be shown as liabilities on a
consolidated balance sheet of Servicer and its Affiliates as
of such time prepared in accordance with generally accepted
accounting principles consistently applied, minus
(c) the net book value of all assets, after
deducting any reserves applicable thereto, which would be
treated as intangible under generally accepted accounting
principles consistently applied including, without limitation,
good will, trademarks, trade names, service marks, brand
names, copyrights, patents, and unamortized debt discount and
expense, organizational expenses and the excess of the equity
in any Affiliate over the cost of the investment in such
Affiliate, minus
(d) the amount of any debt obligations to
Servicer or any of its Affiliates by any shareholder, officer
or director of Servicer or any such Affiliate,
is equal to at least the sum of (i) (A) when determining whether a Trigger
Event has occurred, $11,800,000 and (B) on any other date of determination,
$12,250,000 and (ii) 75% of the cumulative after tax net income since December
31, 1995 of Servicer and its Affiliates.
"Tax Amounts" shall have the meaning specified in Section
3.02.
"Termination Notice" shall have the meaning specified in
Section 9.01.
"Transfer Agent and Registrar" shall have the meaning
specified in Section 6.03 and shall initially be Trustee's Corporate
Trust Office.
"Transition Cost" shall mean any reasonable, out-of-pocket,
documented expenses and allocated cost of personnel reasonably
incurred by a Successor Servicer or Trustee or Bond Insurer in
connection with a transfer of servicing from the Servicer to a
Successor Servicer as Successor Servicer pursuant to Section 9.02, but
not to exceed $50,000.00 in the aggregate.
-18-
25
"Trigger Event" shall mean any of the following events (unless
waived by Bond Insurer in its sole discretion): (1) for any three
consecutive Collection Periods, the average of the Annualized Default
Rates for such consecutive Collection Periods shall be equal to or
greater than 6.5%; (2) for any three consecutive Collection Periods,
the average of the Delinquency Rates shall be equal to or greater than
7.0%; (3) the Tangible Net Worth Requirement is not met; (4) there is
a Servicer Default; (5) if either (A) Xxxxx Xxxxx or (B) Xxxxx Xxxxxxx
and Xxxxx Xxxxxx are no longer officers of Rockford or become
incapable of working for a period of six (6) months or more; or (6)
Bond Insurer makes a payment to Trustee under the Policy; provided,
however, that if Rockford or Servicer shall merge, consolidate or
effect any other corporate structural change, including without
limitation any transfer of a majority of the Servicer's voting
securities, Bond Insurer shall have the right, in its sole discretion,
to modify the definition of Trigger Event.
"Trust" shall mean the trust created by this Agreement, the
corpus of which shall consist of the Trust Assets and which shall be
known as the "Rockford Lease Backed Trust 1997-1."
"Trust Assets" shall mean all Lease Contracts and all other
assets, property, interests and rights described in Sections 2.01(c)
and (d) as being transferred, assigned, set-over and otherwise
conveyed or granted to Trustee for the benefit of the Trust, Bond
Insurer and Certificateholders, and the security interests granted to
Trustee in respect of the Equipment and other Trust Assets and the
Letter of Credit, and all proceeds and income of the foregoing or
relating thereto including, without limitation, funds from time to
time deposited in the Accounts.
"Trust Termination Date" shall mean the earlier to occur of
(a) the date on which all Trust Assets have been distributed pursuant
to this Agreement, and (b) the day after the date on which the Class A
Certificate Investor Interest is first reduced to zero and Bond
Insurer has received all amounts owed to it hereunder and under the
Insurance Agreement.
"Trustee" shall mean the institution executing this Agreement
as Trustee or any successor trustee appointed as herein provided.
"Trustee Fee" shall mean an amount, for each Payment Date,
equal to one-twelfth (1/12th) of 0.0125% of the aggregate of the
Certificate Balances of all outstanding Certificates as of the first
day of the Collection Period immediately preceding such Payment Date.
"UCC" shall mean the Uniform Commercial Code, as amended from
time to time, as in effect in the relevant jurisdiction.
-19-
26
"Vehicle" shall mean a commercial motor vehicle which is the
subject of a Lease Contract, including the types of equipment
described in Exhibit K to the Purchase Agreement under Asset Codes 35
and 51.
"Warranty Purchase Amount" shall mean, for each Lease Contract
required to be repurchased by Seller pursuant to Section 7.01 of the
Purchase Agreement, the amount required to be paid by Seller for such
Lease Contract pursuant to such Section 7.01.
Section 1.02 Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(b) As used herein and in any certificate or other document made
or delivered pursuant hereto or thereto, accounting terms not defined in
Section 1.01, and accounting terms partly defined in Section 1.01 to the extent
not defined, shall have the respective meanings given to them under generally
accepted accounting principles, as applicable, as in effect on the date hereof.
To the extent that the definitions of accounting terms herein are inconsistent
with the meanings of such terms under generally accepted accounting principles
or regulatory accounting principles, the definitions contained herein shall
control.
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; and Section,
Schedule and Exhibit references contained in this Agreement are references to
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified.
(d) With respect to any Collection Period, the "related
Determination Date," the "related Record Date," the "related Payment Date," and
the "related Deposit Date" shall mean the Determination Date, Record Date,
Payment Date and Deposit Date, respectively, next following the end of such
Collection Period, and the relationships among Determination Dates, Deposit
Dates, Payment Dates and Record Dates shall be correlative to the foregoing
relationships.
(e) Reference to any agreement shall mean such agreement as it is
amended or supplemented from time to time.
(f) Reference to any party shall mean that party, its successors
and assigns permitted by the terms of this Agreement.
-20-
27
ARTICLE II
ESTABLISHMENT OF TRUST; CONVEYANCE OF TRUST ASSETS;
TITLE AND PRESERVATION OF SECURITY INTERESTS
Section 2.01 Establishment of Trust; Initial and Subsequent Closings;
Conveyance of Trust Assets.
(a) Seller hereby appoints Trustee as trustee of the Trust
effective as of the Initial Closing Date, and Trustee hereby acknowledges and
accepts such appointment. The Trust shall be administered pursuant to the
provisions of this Agreement for the benefit of the Certificateholders and Bond
Insurer. Trustee is hereby specifically empowered to conduct any business
dealings with Seller and Servicer on behalf of the Trust and Bond Insurer in
accordance with the terms of this Agreement, and shall have all the rights,
powers and duties of Trustee set forth in this Agreement. The parties hereto
intend that the Trust constitute a trust under the laws of the State of New
York.
(b) [Intentionally Omitted]
(c) Effective as of each Closing Date, Seller shall have
transferred, assigned, set over and otherwise conveyed pursuant to a Sale
Assignment to Trustee for the benefit of the Trust, Bond Insurer and the
Certificateholders all right, title and interest of Seller (but none of the
obligations), whether then existing or thereafter acquired, in, to and under
(i) each Lease Contract and any and all moneys of whatsoever nature (payable
upon the occurrence of any event) payable pursuant to each Lease Contract on
and after the applicable Cut-Off Date, including (without limitation) each
Scheduled Payment, any early termination, any guaranties, stipulated loss
casualty value or any past due interest and late charges, and damages and other
amounts receivable in connection with the default by the Lessee, (ii) all
rights, powers and remedies of Seller under or in connection with each Lease
Contract, whether arising under the terms of such Lease Contract, by statute,
at law or in equity, or otherwise arising out of any default by the Lessee
under such Lease Contract, including (without limitation) all rights to give or
receive any notice, consent, approval or waiver thereunder, (iii) all rights,
powers and remedies of Seller under the Equipment and Lease Purchase Agreement,
(iv) all Security Deposits in respect of each Lease Contract provided by or on
behalf of the Lessee thereunder, (v) the Lease Files relating to the Lease
Contracts and the contents thereof, (vi) any Insurance Policy or Insurance
Proceeds with respect to such Lease Contracts and (vii) to the extent that the
same then or thereafter exist, all proceeds, products, rents and profits of the
foregoing of any nature whatsoever, including (without limitation) all proceeds
of proceeds and the conversion, voluntary or involuntary, of any thereof. As
used in this Section 2.01(c), the term "Lease Contracts" shall be deemed to
refer to the Lease Contracts covered by the Sale Assignment delivered by Seller
in connection with the closing on such Subsequent Closing Date. The foregoing
transfer, sale, assignment and conveyance shall not constitute and is not
intended to result (and shall not result) in the creation, or an assumption by
Trustee, the Trust, Bond Insurer or any Certificateholder, of any obligation of
Seller or any other Person in connection with the Lease
-21-
28
Contracts or under any agreement or instrument relating thereto, including any
obligation to any Lessee under the Lease Contracts.
(d) To secure the performance of Seller's obligations hereunder
and to secure the payment of all amounts owed from time to time under the
Certificates, pursuant to each Sale Assignment Seller shall assign and grant to
Trustee for the benefit of the Trust, the Certificateholders and Bond Insurer
liens and perfected security interests in (i) all right, title and interest of
Seller (whether in the nature of an ownership interest, lien or security
interest, or otherwise) in and to each item of Equipment subject to each Lease
Contract including, without limitation, all additions, alterations, accessions
or modifications thereto or replacements of any part thereof, and all
intangibles and other rights associated with the Equipment including, without
limitation, any licenses to use or own the Equipment and any manufacturer's or
other warranties with respect to the Equipment; provided, however, that the
security interest so granted in Equipment having an original value of not more
than $50,000 need not be perfected, (ii) to the extent not comprising a part of
the Lease Files, any material agreements to which Seller is a party, as
assignee or otherwise, relating to such Lease Contracts or Equipment, such as
bills of sale, Lessee consents to the sale of the Lease Contracts to Seller, in
each case as the same may be modified, amended, supplemented or restated from
time to time, (iii) all documents of title, books and records concerning the
foregoing property (including, without limitation, all computer programs,
tapes, disks and related items containing any such information), and (iv) to
the extent the same now or hereafter exist, all proceeds of the foregoing of
any nature whatsoever, including (without limitation) all proceeds of sale,
proceeds of proceeds and the conversion, voluntary or involuntary, of any
thereof.
(e) In connection with each transfer of Lease Contracts to
Trustee, the parties hereto hereby acknowledge and agree that the Lease Files
relating to such Lease Contracts will be delivered to Trustee on or prior to
the related Closing Date.
(f) In connection with each transfer of Lease Contracts to
Trustee, Servicer agrees, at its own expense, to indicate in the Lease
Management System that such Lease Contracts have been transferred to the Trust
pursuant to this Agreement for the benefit of the Certificateholders and Bond
Insurer. In the case of Lease Contracts funded by the initial Certificates
which have been prepaid in full after the Initial Cut-Off Date and prior to the
Initial Closing Date, Seller shall, on the Initial Closing Date, deposit the
Warranty Purchase Amount in the Investment Account in lieu of delivering the
documents specified in the preceding sentence to Trustee.
(g) Except as otherwise provided in Section 12.14 hereof with
respect to tax treatment only, the parties hereto acknowledge that each
transfer of Trust Assets (other than the Equipment) to the Trust is intended to
be a sale and not a loan and a grant or assignment of a valid first priority
perfected security interest in the Equipment (except, with respect to
perfection, as set forth in the proviso in Section 2.01(d)), free and clear of
all Liens, from the Seller to the Trust and that the Trust Assets not be part
of the estate of Seller in the event of an insolvency or bankruptcy of Seller.
However, in the event the transfer of the Trust Assets is deemed to be a
secured financing, Seller
-22-
29
shall be deemed hereunder to have granted to Trustee and does hereby grant to
Trustee for the benefit of the Certificateholders and Bond Insurer and to
secure payment of all amounts payable under the Certificates, a lien and valid
first priority perfected security interest in all of its right, title and
interest in and to the Trust Assets (except, with respect to perfection, as set
forth in the proviso in Section 2.01(d)), whether now owned or hereafter
acquired. For purposes of such grant, this Agreement shall constitute a
security agreement and pledge agreement under applicable law with respect to
the Trust Assets. With respect to the filing of any UCC financing statements
which may be made in connection with any assignment and transfer herein
contemplated, such filing shall in no way be construed as being contrary to the
intent of the parties that this transaction be treated as a sale to the Trust
of all of Seller's right, title and interest in and to the Trust Assets.
(h) Subject to the satisfaction of the conditions set forth in the
Purchase Agreement, on each Subsequent Closing Date and pursuant to the written
order of Seller (in its individual capacity), Trustee shall cause Certificates
in an amount evidencing the aggregate principal balance of the Certificates to
be issued on such Subsequent Closing Date to be duly authenticated and
delivered to Seller or Seller's designee.
(i) Trustee shall not be responsible for the value, form,
substance, validity, perfection, priority, effectiveness or enforceability of
any of the documents in the Lease Files or for or with respect to the efficacy
of the Trust or its ability to generate the payments to be distributed to the
Certificateholders, Seller or Servicer under this Agreement. To the extent not
theretofore accomplished, Servicer agrees on or before each Closing Date (or
promptly after the Closing Date in the case of filings which are permitted to
be made after the Closing Date under the terms of the Purchase Agreement) (i)
to record and file, at its own expense, financing statements (and, subsequently
as required, continuation statements with respect to such financing statements)
with respect to the Trust Assets meeting the requirements of applicable state
law in such manner and in such jurisdictions as are necessary to perfect, and
to maintain the perfection of, the transfer of the Trust Assets to the Trust;
and (ii) to deliver a certificate with respect to the filing of such financing
statements to Trustee, Bond Insurer and Centre Square.
Section 2.02 Acceptance by Trustee.
(a) Trustee hereby acknowledges its acceptance on behalf of the
Trust of the right, title and interest in and to the Trust Assets described in
Sections 2.01(c) and (d), and declares that it shall maintain such right, title
and interest, upon the trust herein set forth, for the benefit of all
Certificateholders and Bond Insurer.
(b) Trustee hereby agrees not to disclose to any Person any of the
information contained in the Lease Schedule except as is required under
applicable law or in connection with the performance of its duties hereunder or
in enforcing the rights of the Certificateholders or Bond Insurer or to a
Successor Servicer appointed pursuant to Section 9.02. Trustee agrees to take
such measures as shall be reasonably requested by Seller to protect and
maintain the security and confidentiality of such information, and, in
connection therewith, shall allow Seller to inspect
-23-
30
Trustee's security and confidentiality arrangements from time to time upon
prior notice during normal business hours. Unless otherwise required by
applicable law, Trustee shall provide Seller with written notice 15 Business
Days prior to any disclosure pursuant to this Section 2.02(b).
(c) Trustee shall have no power to create, assume or incur Debt or
other liabilities in the name of the Trust or incur or suffer to exist any Lien
upon the Trust Assets other than as contemplated in this Agreement.
Section 2.03 Lease Receivables; Repurchase; Substitution.
(a) If at any xxxx Xxxxxx, Bond Insurer or Trustee obtains
knowledge, discovers or is notified by Servicer that any of the representations
and warranties of Rockford in the Equipment and Lease Purchase Agreement were
incorrect at the time as of which such representations and warranties were
made, then the Person discovering such defect, omission, or circumstances shall
promptly notify Bond Insurer and other parties to this Agreement.
(b) In the event that any representation or warranty of Rockford
in Section 3.02 of the Equipment and Lease Purchase Agreement is incorrect and
materially and adversely affects the interests of the Bond Insurer or the
Certificateholders, then Seller shall require Rockford pursuant to the
Equipment and Lease Purchase Agreement to eliminate or otherwise cure the
circumstance or condition which has caused such representation or warranty to
be incorrect, within 30 days (or such longer period as Trustee and Bond Insurer
may in their discretion consent to) after the discovery thereof by or notice
thereof to Rockford. If Rockford fails or is unable to cure such circumstances
or condition within such cure period, then on or before the next succeeding
Determination Date after the expiration of such cure period, Seller shall
require Rockford to either (i) purchase each Lease Contract and the related
Equipment as to which such representation or warranty is incorrect, or (ii)
substitute for such Lease Contract and the related Equipment a Substitute Lease
Contract and all related Equipment, in each case in accordance with the terms
and conditions of the Equipment and Lease Purchase Agreement; provided,
however, that each Substitute Lease Contract shall meet the Substitution
Criteria and shall be subject to the requirements of Section 2.03(e) hereof.
The proceeds of any such repurchase shall be remitted by Rockford or Seller to
Servicer for deposit by Servicer in the Investment Account no later than 3:00
p.m. New York time on the related Determination Date.
(c) If Seller fails to enforce the purchase or substitution
obligation of Rockford under the Equipment and Lease Purchase Agreement,
Trustee is hereby appointed attorney-in-fact to act on behalf of and in the
name of Seller to require such purchase or substitution.
(d) With respect to any Lease Contract to be prepaid or terminated
early, Seller shall be entitled either to purchase such Lease Contract and the
related Equipment for the Repurchase Price which Seller shall deposit in the
Investment Account on or before 3:00 p.m. New York time on the next succeeding
Determination Date or to deliver a Substitute Lease Contract therefor meeting
the Substitution Criteria; provided, however, that the cumulative Discounted
Lease Contract Balance
-24-
31
of such prepaid or early-terminated Lease Contracts which are substituted by
Seller (measured as of the date of substitution) shall not exceed 5% of the
Aggregate Discounted Lease Contract Balance (measured as of the date of
substitution); provided, further, that with respect to prepaid or
early-terminated Lease Contracts in excess of such 5% limit, Seller shall cause
to be deposited into the Investment Account, on or before 3:00 p.m. New York
time on the related Determination Date, the related Prepayment Penalty.
(e) Seller shall provide to Trustee on the date of delivery of any
Substitute Lease Contract submitted by Seller under Section 2.03(b)(ii) or
Section 2.03(d) hereof the items listed in (i) and (ii) below, and to Bond
Insurer the item listed in (i) below, and Seller shall provide to Trustee and
Bond Insurer at the end of each calendar quarter (or, with respect to each
Substitute Lease Contract substituted hereunder by Seller on or after the
fifteenth day of the last month of such calendar quarter, within fifteen (15)
days after the date of such substitution) the items listed in (iii) below with
respect to any Substitute Lease Contracts substituted during such period;
(i) a supplement to the Equipment and Lease Purchase
Agreement and this Agreement substantially in the form of Exhibit "B"
to the Equipment and Lease Purchase Agreement and Exhibit "H" hereto,
subjecting such Substitute Lease Contract and the related Equipment to
the provisions hereof and thereof, and providing with respect to such
Substitute Lease Contract and related Equipment the information set
forth in the Lease Schedule;
(ii) the original executed counterpart of the Lease
Contract relating to such Substitute Lease Contract and the related
Lease File, including the Original Certificate of Title, if
applicable; and
(iii) evidence that financing statements have been
filed with respect to such Substitute Lease Contract in accordance
with the Equipment and Lease Purchase Agreement.
(f) If Seller fails to deliver to Trustee a Certificate of Title
for a Vehicle within ninety (90) days of the related Closing Date, Seller shall
repurchase the related Lease Contract by payment of the Warranty Purchase
Amount to Trustee for deposit into the Investment Account no later than 3:00
p.m. New York time on the related Determination Date.
Section 2.04. Releases.
(a) Seller shall be entitled to obtain a release from
the lien of this Agreement for any Lease Contract and the related Equipment at
any time: (i) after a payment by Rockford of the Purchase Amount of the Lease
Contract; (ii) after a Substitute Lease Contract is substituted for such Lease
Contract, in accordance with Section 2.03(b)(ii) or Section 2.03(d) and Section
2.03(e) hereof; or (iii) upon the termination of a Lease Contract following the
sale, lease or other disposition of the related Equipment; provided that, in
each case, Seller first delivers to Trustee and
-25-
32
Bond Insurer an Officer's Certificate (A) identifying the Lease Receivable and
the related Lease Contract and Equipment to be released, (B) requesting the
release thereof, (C) certifying that the requirements of Section 2.03(b)(ii) or
Section 2.03(d), as the case may be, and Section 2.03(e) hereof have been
satisfied, in the event such Lease Contract and Equipment are being transferred
and assigned the pursuant to clause (ii) hereof, (D) setting forth the amount
deposited in the Investment Account with respect thereto, in the event a Lease
Contract and the related Equipment are being released from the lien of this
Agreement pursuant to clause (i) and (iii) hereof, and (E) certifying that the
amount deposited in the Investment Account with respect to such Lease Contract
equals (1) the Purchase Amount of the Lease Contract, in the event the release
of such Lease Contract and related Equipment pursuant to clause (i) hereof, or
(2) equals the entire amount of Recoveries or Residual Proceeds received with
respect to such Lease Contract and related Equipment, in the event of a release
from the lien of this Agreement pursuant to clause (iii) hereof; provided,
however, that upon the termination of any Lease Contract, any Residual Proceeds
from the related Equipment shall be placed in the Investment Account prior to
Trustee or Seller releasing such Equipment from the security interest granted
to the Trustee by Seller pursuant to this Agreement and prior to Seller
transferring and assigning such Lease Contract and related Equipment to
Rockford pursuant to the Equipment and Lease Purchase Agreement.
(b) Upon satisfaction of the conditions specified in subsection
(a) above, Trustee shall release from the lien of this Agreement and deliver to
or upon the order of Seller the Lease Contract, the Lease Receivable and the
Equipment described in Rockford's request for release.
ARTICLE III
ADMINISTRATION AND SERVICING
OF LEASES AND EQUIPMENT
Section 3.01 Acceptance of Appointment; Duties of Servicer.
(a) Rockford is hereby appointed as Servicer of the Lease
Contracts and Equipment. Rockford hereby accepts such appointment and agrees
to act as Servicer under this Agreement, for the benefit of the Trust, Bond
Insurer and the Certificateholders, and the Certificateholders by their
acceptance of the Certificates consent to Rockford's acting as Servicer.
Servicer shall service, administer and enforce the Lease Contracts as Servicer
and shall have full power and authority to do any and all things in connection
with such servicing and administration which it may deem reasonably necessary
or desirable in a manner consistent with the other terms of this Agreement.
(b) Servicer shall manage, service, administer and make
collections on the Lease Contracts using that degree of skill, attention and
care consistent with the highest degree of skill and care that Servicer
exercises with respect to all comparable equipment leases that it services for
itself or others and otherwise in accordance with the Servicing Procedures,
accepted practices of prudent lending institutions and applicable law (giving
due consideration to Trustee's, Bond
-26-
33
Insurer's and Certificateholder's reliance on Servicer). Servicer's duties
shall include collection and posting of all payments, responding to inquiries
of Lessees, investigating delinquencies, accounting for collections and
furnishing monthly and annual statements to Trustee and Bond Insurer with
respect to collections and distributions, directing Trustee as to investment of
funds in the Accounts and deposits to the Accounts as set forth in this
Agreement, and using commercially reasonable best efforts to maintain Trustee's
title to or security interest in the Lease Contracts and the Equipment.
Servicer shall have full power and authority, acting alone, to do any and all
things in connection with such managing, servicing, administration and
collection that it may deem reasonably necessary or desirable. If Servicer
commences a legal proceeding to enforce a Defaulted Lease Contract pursuant to
Section 3.04 or commences or participates in a legal proceeding (including,
without limitation, a bankruptcy proceeding) relating to or involving a Lease
Contract or Defaulted Lease Contract, Trustee shall thereupon be deemed to have
automatically assigned such Lease Contract to Servicer for purposes of
commencing or participating in any such proceeding as a party or claimant, and
Servicer is authorized and empowered by Trustee, pursuant to this Section
3.01(b), to execute and deliver, on behalf of itself, the Trust, the
Certificateholders and/or the Trustee, or any of them, any and all instruments
of satisfaction or cancellation, or partial or full release or discharge, and
all other notices, demands, claims, complaints, responses, affidavits or other
documents or instruments in connection with any such proceedings. Trustee
shall furnish Servicer with any executed certificates of title, powers of
attorney and other documents reasonably necessary or appropriate to enable
Servicer to carry out its servicing and administrative duties under this
Agreement. If in any enforcement suit or legal proceeding it shall be held
that Servicer may not enforce a Lease Contract on the grounds that it shall not
be a real party in interest or a holder entitled to enforce such Lease
Contract, Trustee shall, at the Servicer's expense and direction, take steps to
enforce such Lease Contract, including bringing suit in its name or the name of
the Certificateholders. Without limiting the foregoing, in connection with the
Lease Contracts, Servicer shall implement the Servicing Procedures.
(c) At the request of a Lessee, Servicer may in its reasonable
discretion consent to the assignment or sublease of a unit of Equipment under a
Lease Contract provided that such Lessee will remain primarily liable for all
obligations under such Lease Contract; provided, however, that the cumulative
Discounted Lease Contract Balance of the Lease Contracts with respect to which
Servicer grants such consent shall not exceed 5% of the Initial Aggregate
Certificate Principal Balance.
(d) Upon the expiration or termination of a Lease Contract, and
subject to any purchase provisions thereof and the rights of the Lessee,
Servicer shall use commercially reasonable best efforts to sell or remarket the
Equipment under such Lease Contract on behalf of Seller to any willing
purchaser. Proceeds realized in connection with each such sale or remarketing
shall be deposited in the Investment Account. Seller hereby appoints Servicer
as its attorney in fact for the purpose of selling or remarketing any such
Equipment, and Servicer shall have the right and authority, as attorney in fact
for Seller, to do any and all things and to execute and deliver any and all
instruments on behalf of Seller that Seller could do or execute and deliver
directly. The foregoing power of attorney shall be irrevocable and is hereby
declared to be coupled with an
-27-
34
interest. Seller agrees to execute any and all powers of attorney and other
instruments reasonably necessary or convenient to evidence or give effect to
the foregoing power of attorney.
(e) If within 30 days following a Lease Contract becoming a
Defaulted Lease Contract, the Equipment covered by such Lease Contract has not
been sold or remarketed and the sales proceeds realized from the sale or
remarketing of such Equipment have not been deposited into the Investment
Account, then the Trust's security interest in such Equipment may be foreclosed
upon and following such foreclosure the provisions of Section 3.04 shall apply.
(f) Servicer shall have the responsibility for approving
amendments or supplements to Lease Contracts, acting commercially reasonably
and in accordance with the Servicing Procedures; provided, however, that any
such amendment or supplement shall not materially and adversely affect the
interests of the Certificateholders or Bond Insurer. Servicer shall not
consent to any amendment which (a) would reduce or forgive any Scheduled
Payments, defer the payment of any principal or interest or any Scheduled
Payment, reduce the Discounted Lease Contract Balance or extend the term
thereof in any manner that would prevent the complete amortization of the
Discounted Lease Contract Balance from occurring by six (6) months prior to
Stated Maturity, or (b) would result in such Lease Contract, as amended or
supplemented, no longer being an Eligible Lease Contract. All payments
received under a Lease Contract whose term has been so amended past its
scheduled expiration date shall be deposited in the Investment Account.
Servicer shall provide Bank-up Servicer, Bond Insurer and Trustee with an
amendment to the Lease Schedule reflecting any modifications of any Scheduled
Payment.
(g) Without limiting the generality of the other provisions of
this Agreement which provide that all Lease Files will be delivered to and held
by Trustee (except for any Lease Files temporarily made available to Servicer
under Section 3.07(b)) and that all Collections will be deposited directly by
Servicer to the Lockbox Account not less frequently than twice weekly, on each
Tuesday and Thursday, Servicer shall keep separate any Lease Files or
Collections received by it until the same are delivered to Trustee or deposited
in the Investment Account and shall not commingle such Lease Files or
Collections with the files, collections or other assets of Servicer, Seller, or
any other Person.
Section 3.02 Collection of Payments.
(a) Servicer shall use commercially reasonable best efforts to
collect all payments called for under the terms and provisions of the Lease
Contracts as and when the same shall become due. To the extent any such
Collections are received by Servicer outside of the Lockbox Account, such
Collections shall be deposited by Servicer in the Investment Account within two
Business Days of receipt. Servicer may in its discretion waive any late
payment charge or any other similar interest that may be owed in connection
with a Lease Contract if Servicer believes in good faith that the cost of
pursuing the collection of such charge or interest would outweigh the benefit
of such charge or interest.
-28-
35
(b) Servicer may permit the prepayment in full of any Lease
Contract without the consent of Trustee, provided that all of the following
conditions are satisfied: (i) such prepayment is in accordance with the
Servicing Procedures and Servicer's usual and customary practices and
procedures for prepayments; (ii) the amount of such prepayment is not less than
the sum of (x) any past due Scheduled Payments under the Lease Contract and
other payments that are past due under the Lease Contract and (y) the Warranty
Purchase Amount. All amounts received with respect to all prepayments
permitted under this Section 3.02(b) shall be deposited in the Investment
Account.
(c) Servicer shall use commercially reasonable best efforts to
collect all payments with respect to amounts due for sales, use and property
taxes and similar taxes or assessments on the Equipment, the Lease Contracts or
the rentals or other payments due thereunder ("Tax Amounts") and shall remit
such Tax Amounts to the appropriate Governmental Authorities on or prior to the
date such payments are due. Tax Amounts may be retained by Servicer for
purposes of paying such amounts to the appropriate Governmental Authorities,
and in the event any Tax Amount is paid by a Lessee and deposited in the
Lockbox Account or Investment Account during any Collection Period, Servicer
will instruct Trustee in writing to withdraw such Tax Amount from the
Investment Account and pay such Tax Amount on the next Payment Date to Servicer
who will then promptly pay such Tax Amount to the applicable Governmental
Authorities.
Section 3.03 Servicer Advances. If on any Determination Date
Servicer determines that any Scheduled Payments due on a Lease Contract in the
related Collection Period have not been received prior to such Determination
Date, Servicer, to the extent that it determines, in its reasonable discretion,
that it can recoup advances of Scheduled Payments from subsequent collections
under such Lease Contract, will make a Servicer Advance up to an amount equal
to the amount of such delinquent Scheduled Payments not received by the
Determination Date. If Servicer determines not to make a Servicer Advance
pursuant to the preceding sentence, the related Lease Contract shall be deemed
to be a Defaulted Lease Contract. Servicer shall deposit any Servicer Advances
into the Investment Account on or prior to 3:00 p.m. New York time on the
Determination Date in same day funds. Servicer shall be entitled to be
reimbursed for Servicer Advances by subsequent payments by or on behalf of the
Lessee under such Lease Contract; provided, Servicer shall not be reimbursed
for any Servicer Advance made in respect of a Defaulted Lease Contract after it
becomes a Defaulted Lease Contract.
Section 3.04 Realization Upon Defaulted Lease Contracts.
Servicer shall use commercially reasonable best efforts to repossess or
otherwise comparably convert the ownership of any Equipment that it has
reasonably determined should be repossessed or otherwise converted following a
Lease Contract being classified as a Defaulted Lease Contract. Servicer shall
act as remarketing sales and processing agent for Equipment that is so
repossessed. Servicer shall follow such practices and procedures as it shall
deem reasonably necessary or advisable and consistent with the standard of care
set forth in Section 3.01(b), which may include reasonable efforts to enforce
the recourse obligations of Lessees and repossessing and selling the Equipment
at public or private sale. The foregoing is subject to the provision that, in
any case in which the Equipment shall have suffered damage, Servicer shall not
expend funds in connection with any repair or
-29-
36
towards the repossession of such Equipment unless it shall determine in its
reasonable discretion that such repair and/or repossession will increase the
Liquidation Proceeds by an amount greater than the amount of such expenses.
Servicer shall remit to the Investment Account all Liquidation Proceeds
received in connection with the sale or disposition of a Defaulted Lease
Contract.
Section 3.05 Security Deposits. Servicer shall maintain the Security
Deposits on behalf of Trustee, Bond Insurer and the Certificateholders. If
at the expiration of a Lease Contract Servicer in its reasonable judgment
determines that all or any part of a Security Deposit relating to such Lease
Contract should be returned to the Lessee thereunder, such return shall be
accomplished. Any Security Deposits or portions thereof which Servicer
reasonably determines should not be returned to a Lessee under a Lease Contract
at the termination thereof shall be duly endorsed (where applicable) and
deposited in the Investment Account.
Section 3.06 Representations and Warranties of Servicer. Servicer
hereby represents and warrants to the Trust, Trustee, Bond Insurer and each
Certificateholder that:
(a) Organization and Good Standing. Servicer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California, with power and authority to own its properties and to
conduct its business as presently conducted.
(b) Due Qualification. Servicer is qualified to do business as a
foreign corporation and is in good standing and has obtained all necessary
licenses and approvals in all states 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 so qualify or obtain such licenses and approvals
would not, in the aggregate, materially adversely affect the ability of
Servicer to perform its obligations under this Agreement, the Purchase
Agreement, the Insurance Agreement, the Letter of Credit Reimbursement
Agreement or the Equipment and Lease Purchase Agreement.
(c) Power and Authority. Servicer has the corporate power and
authority and legal right (including all requisite approvals, licenses and
permits) to execute and deliver this Agreement, the Purchase Agreement, the
Insurance Agreement, the Letter of Credit Reimbursement Agreement and the
Equipment and Lease Purchase Agreement and to carry out their respective terms;
and the execution, delivery and performance of this Agreement, the Purchase
Agreement, the Insurance Agreement, the Letter of Credit Reimbursement
Agreement and the Equipment and Lease Purchase Agreement has been duly
authorized by Servicer by all necessary corporate action.
(d) No Violation. The consummation of the transactions
contemplated by and the fulfillment of the terms of this Agreement, the
Purchase Agreement, the Insurance Agreement, the Letter of Credit Reimbursement
Agreement and the Equipment and Lease Purchase Agreement 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) a default under, or require any
consent or approval under (as applicable) the certificate of incorporation or
bylaws of Servicer or any indenture, agreement, mortgage, deed of trust or
other instrument to which Servicer is a party or by which it is bound, or
-30-
37
result in the creation or imposition of any material Lien upon any of its
material 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 Servicer of any court or of any federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over Servicer or any of its properties
which would have a material adverse effect on the ability of Servicer to comply
with the terms of this Agreement, the Purchase Agreement, the Insurance
Agreement, the Letter of Credit Reimbursement Agreement or the Equipment and
Lease Purchase Agreement.
(e) No Consent. No consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with any
Governmental Authority having jurisdiction over Servicer or any of its
properties or assets is required to be obtained by or with respect to Servicer
in connection with the execution, delivery and performance by Servicer of this
Agreement, the Purchase Agreement, the Insurance Agreement, the Letter of
Credit Reimbursement Agreement or the Equipment and Lease Purchase Agreement
and the consummation of the transactions contemplated hereby or thereby.
(f) Binding Obligation. Each of this Agreement, the Purchase
Agreement, the Insurance Agreement, the Letter of Credit Reimbursement
Agreement and the Equipment and Lease Purchase Agreement has been duly and
validly authorized, executed and delivered by Servicer and each constitutes a
valid and legally binding obligation of Servicer, enforceable against Servicer
in accordance with its terms as such enforceability is subject to bankruptcy,
reorganization, insolvency, moratorium or other laws affecting creditors'
rights generally and the availability of equitable remedies.
(g) No Proceedings. There are no proceedings or investigations
pending, or, to the knowledge of Servicer, threatened, before any court,
regulatory body, administrative agency or other tribunal or governmental
instrumentality (i) asserting the invalidity of this Agreement, the Purchase
Agreement, the Insurance Agreement, the Letter of Credit Reimbursement
Agreement or the Equipment and Lease Purchase Agreement, (ii) seeking to
prevent the consummation of any of the transactions contemplated by this
Agreement, the Purchase Agreement, the Insurance Agreement, the Letter of
Credit Reimbursement Agreement and the Equipment and Lease Purchase Agreement
or (iii) seeking any determination or ruling that might materially and
adversely affect the performance by Servicer of its obligations under, or the
validity or enforceability, of this Agreement, the Purchase Agreement, the
Insurance Agreement, the Letter of Credit Reimbursement Agreement or the
Equipment and Lease Purchase Agreement.
(h) Principal Place of Business. Servicer's principal place of
business and chief executive office is in the State of California, County of
Orange.
(i) Course of Business. The servicing of the Lease Contracts as
contemplated by this Agreement is in the ordinary course of business of
Servicer.
-31-
38
(j) Financial Statements. The December 31, 1996 audited financial
statements of Servicer heretofore furnished to Centre Square and Bond Insurer
are complete and correct and fairly present the financial condition of Servicer
and the results of its operations as of the said date or dates and for the
period or periods stated, all in accordance with generally accepted accounting
principles and practices applied on a consistent basis.
(k) Liabilities. Servicer did not have, on December 31, 1996, any
material contingent liabilities, liabilities for taxes, unusual forward or
long-term commitments or unrealized or anticipated lawsuits from any
unfavorable commitments except as referred to or reflected or provided for in
such financial statements as of said date. Since December 31, 1996, there has
been no change or event which has had or will have a material adverse effect on
the assets, liabilities, financial condition, business or operations of
Servicer or the ability of Servicer to perform its obligations under this
Agreement, the Purchase Agreement, the Insurance Agreement, the Letter of
Credit Reimbursement Agreement or the Equipment and Lease Purchase Agreement.
(l) Information. Without limiting or qualifying any of the
preceding representations or warranties of Servicer, all written information
heretofore furnished by or made available to Centre Square and Bond Insurer by
Servicer for purposes of or in connection with this Agreement, the Purchase
Agreement, the Insurance Agreement, the Letter of Credit Reimbursement
Agreement or the Equipment and Lease Purchase Agreement was true and correct in
all material respects on the date which such information was stated or
certified and remains true and correct in all material respects as of the
Closing Date, and as of each such date, such information did not omit to state
a material fact necessary to make such information not misleading.
Section 3.07 Covenants of Servicer. Servicer hereby covenants that:
(a) Computer Files. Servicer will, at its own cost and expense,
(i) retain the Lease Management System as a master record of the Lease
Contracts and (ii) xxxx the Lease Management System and other physical records
of the Lease Contracts to the effect that as to the Lease Contracts and related
Equipment listed thereon Seller has sold and assigned all of its right, title
and interest therein to the Trust.
(b) Safekeeping. From time to time Servicer may request that
Trustee deliver to Servicer a Lease File in connection with the enforcement of
the related Lease Contract, in which event Trustee shall deliver such Lease
File to Servicer at Servicer's expense. Servicer will hold all such Lease
Files in its possession as custodian on behalf of the Trust for the use and
benefit of all present and future Certificateholders and Bond Insurer. While
so acting as a custodian, Servicer will act with reasonable care, using that
degree of skill and care consistent with the highest degree of skill and care
that Servicer exercises with respect to all comparable lease contracts that
Servicer services for itself or others. Servicer will promptly report to
Trustee any failure on its part to hold the Lease Files and maintain its
accounts, records and computer systems as herein provided and will promptly
take appropriate action to remedy any such failure. Nothing herein shall be
deemed to require an initial or periodic review by Trustee of the Lease Files.
-32-
39
(c) Indemnification.
(i) In any suit, proceeding or action brought by
Trustee for any sum owing with respect to a Lease Contract, Servicer
shall save, indemnify and keep Trustee, its officers, directors,
employees and agents harmless from and against all costs, expense,
losses, liabilities and damages (including, without limitation,
reasonable out-of-pocket attorneys' fees, related disbursements and
costs of court) suffered by reason of any defense, setoff,
counterclaim, recoupment or reduction of liability whatsoever of the
Lessee under such Lease arising out of a breach by Servicer or its
agents of any obligation under such Lease Contract or arising out of
any other agreement, indebtedness or liability at any time owing to or
in favor of such Lessee or its successor from Servicer, and all such
obligations of Servicer shall be and remain enforceable against and
only against Servicer and shall not be enforceable against Trustee or
the Trust.
(ii) Servicer hereby agrees to defend and indemnify
Trustee, Bond Insurer and the Certificateholders and their respective
officers, directors, employees and agents against all costs, expenses,
losses, liabilities and damages (including, without limitation,
reasonable attorneys' fees, related disbursements and costs of court)
in respect of the breach by Servicer of any of its obligations under
this Agreement or any action taken by Servicer, or failure to take any
action by Servicer, relative to any Lease Contract or arising out of
any proven failure of compliance of any Lease Contract with the
provisions of any applicable law or regulation of any Governmental
Authority or as the result of any improper act or omission relating to
the custody by Servicer of those Lease Files from time to time
delivered to Servicer.
(iii) THE INDEMNIFICATIONS PROVIDED TO EACH INDEMNIFIED
PARTY IN THIS SECTION 3.07(c) ARE INTENDED TO BE APPLICABLE TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW AND SHALL PROTECT EACH SUCH
INDEMNIFIED PARTY EVEN IF SUCH INDEMNIFIED PARTY IS NEGLIGENT.
(iv) Servicer shall pay any amounts owing under this
clause (c) directly to such indemnified Person and no such amounts
shall be deposited in any Account.
(v) The obligations of Servicer pursuant to this
clause (c) shall survive the termination of the Trust.
(d) Compliance with Law. Servicer will comply, in all material
respects, with all acts, rules, regulations, orders, decrees and directions of
any Governmental Authority applicable to the Trust Assets or any part thereof;
provided, Servicer may contest any act, regulation, order, decree or direction
in any reasonable manner which shall not adversely affect the rights of the
Certificateholders, Bond Insurer and Trustee in the Trust Assets. Servicer
shall maintain all state and federal licenses and franchises necessary to
perform its obligations hereunder.
-33-
40
(e) Preservation of Interest. Servicer shall execute and file (or
cause to be executed and filed) such financing statements, continuation
statements and any other documents requested by Trustee, Bond Insurer or the
Majority Certificateholders or that may be required by law to fully preserve
and protect the interest of Trustee, Bond Insurer and the Certificateholders
hereunder in and to the Trust Assets, in each case consistent with the other
terms and provisions of this Agreement. Servicer shall not assign, sell,
pledge, or exchange, or in any way encumber or otherwise dispose of the Lease
Contracts or the Equipment except as permitted hereunder.
(f) Obligations with Respect to Lease Contracts. Servicer will
duly fulfill and comply, in all material respects, with all obligations on the
part of the "lessor" or "secured party" that are required, pursuant to the
terms of the Lease Contracts, to be performed before or after such Lease
Contracts are assigned to Trustee, and Servicer and will do nothing to impair
the rights of Trustee, Bond Insurer and Trust in the Trust Assets. Servicer
will perform such obligations under and will not change or modify the Lease
Contracts, except to the extent expressly permitted pursuant to the terms of
this Agreement. No obligation or liability to any Lessee under any of the
Lease Contracts is intended to be assumed by the Trust, Trustee, Bond Insurer
or the Certificateholders under or as a result of this Agreement or the
transactions contemplated hereby, all of the same being hereby expressly
disclaimed. Servicer will comply with the Servicing Procedures and will not
amend or modify the Servicing Procedures in any material respect without the
prior written consent of Bond Insurer.
(g) Servicer's Employees and Fidelity Bond. Servicer agrees to
indemnify, defend and protect Trustee, Bond Insurer and the Certificateholders
from and against, and assumes all liabilities and obligations relating to, all
costs, expenses, losses, damages, claims or other liabilities arising out of or
relating to the theft or embezzlement of any funds relating to the Trust Assets
by Servicer's employees and agents. Without limiting the foregoing, Servicer
shall maintain, at its own expense, a blanket fidelity bond, with broad
coverage with responsible companies on all officers, employees or other persons
acting on behalf of Servicer in any capacity with regard to the Lease Contracts
to handle funds, money, documents and papers relating to the Lease Contracts.
Any such fidelity bond shall protect Servicer against losses, including
forgery, theft, embezzlement, and fraud, of such persons and shall be
maintained in a form and amount that would meet the requirements of prudent
institutional Lease Contract servicers. No provision of this Section 3.07(g)
requiring such fidelity bond shall diminish or relieve Servicer from its duties
and obligations as set forth in this Agreement. Servicer shall be deemed to
have complied with this provision if one of its respective Affiliates has such
fidelity bond and, by the terms of such fidelity bond, the coverage afforded
thereunder extends to Servicer. Servicer shall cause each and every
sub-servicer for it to maintain a fidelity bond which would meet such
requirements. Upon request of Bond Insurer, any Certificateholder or Trustee,
Servicer shall cause to be delivered to Trustee and Bond Insurer a
certification evidencing coverage under such fidelity bond. Such fidelity bond
shall not be canceled or modified in a materially adverse manner.
-34-
41
Section 3.08 Servicing Compensation; Payment of Expenses by Servicer.
(a) Servicing Fee. As the sole consideration payable to Servicer
for the performance of its obligations hereunder, Servicer shall be entitled to
receive the Servicing Fee for each Collection Period (payable on the next
succeeding Payment Date).
(b) Expenses. As between Seller, Trustee, the Certificateholders
and Servicer, Servicer shall be required to pay all expenses incurred by it in
connection with its activities under this Agreement, including fees and
disbursements of independent accountants, taxes imposed on Servicer, amounts
owing to the Trustees pursuant to Section 10.04, expenses incurred in
connection with distributions and reports to Trustee and Bond Insurer, expenses
incurred in connection with the repossession or disposition of Equipment or
enforcement of Lease Contracts, including litigation costs and attorneys' fees
related thereto, and all other fees and expenses not expressly stated under
this Agreement to be for the account of the Trust, provided, however, that with
respect to reasonable actual out-of-pocket expenses (including litigation costs
and attorneys fees) incurred in connection with the repossession or disposition
of Equipment or enforcement of Lease Contracts and set forth in the Monthly
Statement, Servicer shall be entitled to reimbursement of such expenses by
Lessee or from proceeds of the Equipment to the extent that the lessor would be
entitled to such reimbursement in accordance with the terms of the related
Lease Contract.
Section 3.09 Monthly Statement; Annual Report.
(a) Monthly Statement and Tape. Servicer will provide to each
Rating Agency, Trustee, Back-up Servicer and Bond Insurer, by 2:00 p.m. New
York time on the Determination Date preceding each Payment Date, and Trustee
will furnish or cause to be furnished to the Certificateholders, on or
immediately following receipt thereof, a statement (the "Monthly Statement")
signed by a Servicing Officer similar to the form of Exhibit D setting forth
the information as of the last day of the Collection Period immediately
preceding the related Payment Date and after giving effect to any withdrawals,
deposits and transfers to occur on or before the related Payment Date as well
as any other information required by Bond Insurer or either Rating Agency. In
addition, Servicer shall provide to the Back-up Servicer and Bond Insurer
simultaneous with the delivery of such Monthly Statement a tape or other
electronic media containing the detailed account and payment information
utilized to prepare such Monthly Statement.
(b) Investment Earnings. To enable Servicer to prepare the Monthly
Statement, Trustee shall provide to Servicer, upon request, on or before the
fifth Business Day following the last day of each Collection Period a statement
as to the balances and total amount of investment income earned on funds on
deposit in the Investment Account, the Cash Collateral Account, if any, and the
Class A Certificate Account during the preceding Collection Period if held by
Trustee.
(c) Annual Report; Audit. Servicer will provide to Trustee, Bond
Insurer and Back-up Servicer within 120 days after the end of each Fiscal Year,
a cumulative summary for the previous Fiscal Year, or, in the case of Fiscal
Year 1997, the remaining portion thereof, of the Monthly
-35-
42
Statements. Any Certificateholder or Bond Insurer may request that a
nationally recognized accounting firm be engaged to conduct one or more audits
with regard to the Accounts, Monthly Statements and similar financial matters
relating to the Trust during any Fiscal Year, in which event Servicer shall
engage, at its expense, such accounting firm and Servicer will cooperate with,
and provide such information as may reasonably be requested by, such accounting
firm.
Section 3.10 Annual Statement as to Compliance; Notice of
Default. Servicer shall deliver an annual report, for delivery to the Trustee,
Bond Insurer and the Rating Agency on or prior to March 31 of each year
commencing March 31, 1998, signed by a Servicing Officer stating that (a) a
review of the activities of Servicer, and Servicer's performance under this
Agreement, for the period ending on the immediately preceding December 31 (or
in the case of the initial report, the Initial Closing Date) has been made
under such Servicing Officer's supervision and (b) certifying to the best of
such officer's knowledge, based on such review, Servicer has or has caused to
be performed all of its obligations under this Agreement throughout such year
and that no Servicer Default, Funding Period Trigger Event or Trigger Event has
occurred, or, if such a Servicer Default, Funding Period Trigger Event or
Trigger Event has so occurred and is continuing, specifying each such event,
the nature and status thereof and the steps necessary to remedy such event.
Section 3.11 Annual Independent Public Accounts' Servicing
Report. On or before the first anniversary of the Initial Closing Date and,
unless required more frequently by either Rating Agency or Bond Insurer after
the occurrence of a Servicer Default, on each yearly anniversary thereafter,
Servicer at its expense shall cause a firm of Independent Public Accounts to
furnish a statement to the Trustee, Bond Insurer, Centre Square and each Rating
Agency to the effect that such firm has examined certain documents and records
relating to the servicing of the Lease Contracts and the reporting requirements
with respect thereto and that, on the basis of such examination, such servicing
and reporting requirements have been conducted in compliance with this
Agreement, except for (a) such exceptions as such firm shall believe to be
immaterial and (b) such other exceptions as shall be set forth in such
statement.
Section 3.12 Merger or Consolidation of, or Assumption of the
Obligations of, Servicer. Servicer shall not consolidate with or merge into
any other corporation or other Person or convey or transfer its properties and
assets substantially as an entirety or ownership to any Person, unless:
(a) the resulting entity formed by such consolidation
or into which Servicer is merged or the Person which acquires by
conveyance or transfer the properties and assets or ownership of
Servicer substantially as an entirety shall be a corporation organized
and existing under the laws of the United States of America or any
State or the District of Columbia, shall meet the Tangible Net Worth
Requirement and shall expressly assume, by an agreement supplemental
hereto, executed and delivered to Trustee in form satisfactory to
Trustee and Bond Insurer, the performance of every covenant and
obligation of Servicer hereunder;
-36-
43
(b) immediately after giving effect to such
transaction, no representation or warranty made by the Servicer in any
Principal Agreement shall have been breached;
(c) Servicer has delivered to Trustee and Bond
Insurer an Officer's Certificate and an Opinion of Counsel, each
stating that such consolidation, merger, conveyance or transfer and
such supplemental agreement comply with this Section 3.12 and that all
conditions precedent herein provided for relating to such transaction
have been complied with;
(d) Servicer shall have delivered to Trustee and Bond
Insurer an Opinion of Counsel either (1) stating that, in the opinion
of such counsel, all financing statements and continuation statements
and amendments thereto have been executed and filed that are necessary
fully to preserve and protect the interest of the Trustee in the Trust
Assets and reciting the details of such filings, or (2) stating that,
in the opinion of such counsel, no such action shall be necessary to
preserve and protect such interest; and
(e) Bond Insurer has given its prior written consent
(not to be unreasonably withheld).
Servicer shall provide prior written notice of such event to the
Rating Agencies and Bond Insurer. If, after the Initial Cut-Off Date, Servicer
shall merge, consolidate or effect any other corporate structural change,
including without limitation transfer of ownership of the majority of
Servicer's voting securities, Bond Insurer shall have the right, in its sole
discretion, to modify the Servicer Defaults, the Funding Period Trigger Events
and/or the Trigger Events.
Section 3.13 Servicer Not To Resign. Servicer shall not
resign from the obligations and duties hereby imposed on it except upon
determination that (a) the performance of its duties hereunder is or becomes
impermissible under applicable law, and (b) there is no reasonable action which
Servicer could take to make the performance of its duties hereunder permissible
under applicable law. Any determination pursuant to clause (a) of this Section
3.13 permitting the resignation of Servicer shall be evidenced by an Opinion of
Counsel to such effect and as to clause (b) of this Section 3.13 by an
Officer's Certificate, in each case delivered to Trustee and Bond Insurer. No
Servicer resignation shall become effective until the Back-up Servicer or a
Successor Servicer shall have assumed the responsibilities and obligations of
Servicer in accordance with Section 9.02. If within 120 days after the date of
the determination in clause (a) the Back-up Servicer shall be prohibited under
applicable law or shall otherwise fail to assume the duties of Servicer and a
Successor Servicer has not been appointed, Trustee shall without further action
be appointed as Successor Servicer hereunder unless Trustee shall be legally
unable or shall be unwilling to so act. The provisions of Section 9.01 with
respect to the duties of Servicer in effecting the termination of its servicing
responsibilities and the transfer of such responsibilities to a Successor
Servicer shall be applicable to any resignation pursuant to this Section 3.13.
Notwithstanding anything in this Agreement to the contrary, a Successor
Servicer appointed under this Section 3.13 shall be deemed to be a Successor
Servicer as defined hereunder.
-37-
44
Section 3.14 Access to Certain Documentation and Information
Regarding the Trust Assets. Servicer shall provide to Trustee, Bond Insurer,
the Certificateholders, Back-up Servicer and any accounting firm performing an
audit pursuant to Section 3.09(c) access to the documentation and financial
records regarding the Trust Assets, such access to be afforded without charge
but only (a) upon reasonable request by Trustee, Bond Insurer, Back-up
Servicer, such accounting firm or a Certificateholder, (b) during normal
business hours and (c) subject to Servicer's normal security and
confidentiality procedures. Nothing in this Section 3.14 shall derogate from
the obligation of Seller, Bond Insurer, Trustee, Servicer or any such
accounting firm to observe any applicable law prohibiting disclosure of
information regarding the Lessees and the failure of Servicer to provide access
as provided in this Section as a result of such obligation shall not constitute
a breach of this Section 3.14.
Section 3.15 No Offset. The obligations of Servicer under
this Agreement shall not be subject to any defense, counterclaim or right of
offset that Servicer has or may have against Seller, Trustee, Bond Insurer the
Trust or any Certificateholder, whether in respect of this Agreement, any Trust
Asset, or otherwise.
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS
Section 4.01 Rights of Certificateholders. The Certificates
shall represent undivided interests in the Trust, including the benefits of any
amounts in the Cash Collateral Account and the benefits under the Letter of
Credit and the right to receive the Collections and other amounts at the times
and in the amounts specified in this Article IV to be deposited in the Accounts
or to be paid to the Certificateholders; provided, the aggregate interest
represented by the Certificates at any time shall not exceed the Class A
Certificate Investor Interest at such time, plus interest on such amounts
calculated at the applicable Certificate Rate.
Section 4.02 Establishment of Lockbox Account. Prior to the
date of this Agreement, Servicer, in the name of Trustee for the benefit of the
Certificateholders and Bond Insurer, has, pursuant to agreements (each, a
"Lockbox Agreement"), established and shall maintain with the Newark, New
Jersey lockbox facility of Financial Telesis, Inc. (the "Lockbox Servicer"),
which is an Eligible Institution, a post office lockbox (the "Post Office
Lockbox"), and has established and shall maintain with a Pennsylvania office or
branch of CoreStates Bank, N.A. (the "Lockbox Account Bank"), which is an
Eligible Institution, a lockbox account (the "Lockbox Account"). The Post
Office Lockbox shall be serviced by the Lockbox Servicer and shall be used as a
payment address only for payments due under or in respect of the Lease
Contracts and Equipment. Prior to the date of this Agreement, Servicer shall
send or cause to be sent to all Lessees a written notice whereby the Lessees
are directed to make all payments in respect of Lease Contracts and Equipment
to the Lockbox Account. The Lockbox Servicer shall remove daily all monies and
checks, drafts and other instruments of payment contained in the Post Office
Lockbox and (where
-38-
45
applicable) shall appropriately endorse for payment and deposit such monies and
checks, drafts and other instruments in the Lockbox Account no later than the
next Business Day following such removal from the Post Office Lockbox. The
Lockbox Account Bank shall remove all funds on deposit in the Lockbox Account
on a basis mutually agreed upon among the Servicer, Bond Insurer and the
Lockbox Account Bank (which shall in no event be less often than every ten
days) and deposit such funds in the Investment Account.
Funds on deposit in the Post Office Lockbox and in the Lockbox Account
shall remain uninvested. Servicer shall cause the Post Office Lockbox and the
Lockbox Account to be maintained at an Eligible Institution in the name of the
Trustee for the benefit of the Certificateholders and Bond Insurer. Servicer
shall give prior written notice to Bond Insurer of (i) the establishment of a
new Post Office Lockbox or Lockbox Account, as applicable or (ii) a change in
the location of the Post Office Lockbox or Lockbox Account, as applicable. If,
at any time, the institution holding the Post Office Lockbox or the Lockbox
Account, as the case may be, ceases to be an Eligible Institution, Servicer
shall within five (5) Business Days establish a new Post Office Lockbox or
Lockbox Account, as the case may be, meeting the conditions specified above
with a New York office or branch of an Eligible Institution, and direct the
Lockbox Servicer or the Lockbox Bank, as the case may be, to transfer all funds
and/or assets on deposit to such new Post Office Lockbox or Lockbox Account, as
the case may be, and from the date such new Post Office Lockbox or Lockbox
Account, as applicable, is established, it shall be the "Post Office Lockbox"
or "Lockbox Account," as applicable.
Section 4.03 Establishment of Investment Account. (a) Prior
to the date of this Agreement, Servicer shall establish and maintain with a New
York office or branch of an Eligible Institution (which may be Trustee) a
segregated trust account in the name of the Trustee for the benefit of the
Certificateholders and Bond Insurer (the "Investment Account"). Any funds on
deposit from time to time in the Investment Account shall be deemed held in
trust for the benefit of the Trust, the Certificateholders and Bond Insurer.
Trustee shall possess all right, title and interest in all funds on deposit
from time to time in the Investment Account and in all proceeds thereof. The
Investment Account shall be under the sole dominion and control of Trustee for
the benefit of the Certificateholders and Bond Insurer. The Investment Account
shall be dedicated to and used solely for the deposit of Collections. On the
Initial Closing Date, the Investment Account shall be established with a New
York office of Trustee. Servicer shall give prior written notice to Bond
Insurer of (i) the establishment of a new Investment Account or (ii) a change
in the location of an Investment Account. If, at any time, the institution
holding the Investment Account ceases to be an Eligible Institution, Servicer
shall within 10 Business Days establish a new Investment Account meeting the
conditions specified above with a New York office or branch of an Eligible
Institution, and direct the Trustee to transfer any cash and/or any investments
to such new Investment Account, and from the date such new Investment Account
is established, it shall be the "Investment Account."
(b) Funds on deposit in the Investment Account shall be invested in
Eligible Investments in the name of Trustee for the benefit of the
Certificateholders and Bond Insurer, as directed in
-39-
46
writing by the Servicer, that will mature or otherwise be available for
withdrawal without penalty on each Deposit Date with all realized interest and
other investment earnings (net of losses and investment expenses) to remain a
part of the Investment Account.
Section 4.04 Establishment of the Class A Certificate Account.
(a) Servicer, for the benefit of the Certificateholders and Bond
Insurer, shall establish and maintain or cause to be established and maintained
in the name of Trustee, on behalf of the Trust, with a New York office or
branch of an Eligible Institution (which may be Trustee) a segregated trust
account (the "Class A Certificate Account"), bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of the
Certificateholders and Bond Insurer. Trustee shall possess all right, title
and interest in all funds on deposit from time to time in the Class A
Certificate Account and in all proceeds thereof. The Class A Certificate
Account shall be under the sole dominion and control of Trustee for the benefit
of the Certificateholders and Bond Insurer. If, at any time, the institution
holding the Class A Certificate Account ceases to be an Eligible Institution,
Servicer shall within 10 Business Days establish a new account meeting the
conditions specified above with a New York office or branch of an Eligible
Institution (which may be Trustee), and direct the Trustee to transfer any such
amounts to such new account and from the date such new account is established,
it shall be the "Class A Certificate Account."
(b) [Intentionally omitted]
(c) Funds on deposit in the Class A Certificate Account shall
remain uninvested. On the Initial Closing Date, the Class A Certificate
Account shall be established with a New York office of Trustee. Servicer
shall give prior written notice to Bond Insurer of (i) the establishment of a
new Class A Certificate Account or (ii) a change in the location of the Class A
Certificate Account.
Section 4.05 Letter of Credit; Cash Collateral Account. (a)
Rockford shall cause Letter of Credit Bank to issue the Letter of Credit to
Trustee for the benefit of the Certificateholders and Bond Insurer.
(b) On each Determination Date, Servicer shall determine the
amount to be drawn under the Letter of Credit equal to the amount (the "Draw
Amount") by which the deposits required by Sections 4.08(b)(i) through (x) for
the immediately following Deposit Date exceeds the amount which will be on
deposit in the Investment Account on such Deposit Date; provided, the amount to
be drawn may not exceed the Available LOC Amount.
(c) If for any Payment Date the Draw Amount is greater than zero,
Servicer shall give prompt written notice to Trustee and Bond Insurer of such
positive Draw Amount not later than the close of business on the related
Determination Date and instruct Trustee to make a drawing under the Letter of
Credit in such amount pursuant to the relevant drawing certificate attached to
the Letter of Credit. Upon receipt of such written notice, Trustee shall, no
later than 2:30 X.X.
-00-
00
(Xxx Xxxx time) on the Business Day immediately preceding such Payment Date,
make a drawing under the Letter of Credit in an amount equal to the Draw Amount
for such Payment Date. Trustee shall make such drawing or the drawing
contemplated by Section 4.05(f) by delivering to Letter of Credit Bank, by hand
delivery, telex or facsimile transmission, with a copy to Bond Insurer, the
relevant drawing certificate substantially in the form attached to the Letter
of Credit, appropriately completed, signed by a Responsible Officer and dated
the date of presentation thereof. The drawing certificate shall direct Letter
of Credit Bank to disburse the amount of such drawing to Trustee for deposit in
the Cash Collateral Account by no later than 4:00 P.M. (New York time) on such
Business Day.
(d) Servicer, for the benefit of the Certificateholders and Bond
Insurer, shall establish and maintain, or cause to be established and
maintained in the name of Trustee, on behalf of the Trust, with a New York
office or branch of an Eligible Institution (which may be Trustee), a
segregated trust account bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Certificateholders and
Bond Insurer (the "Cash Collateral Account"). On the Initial Closing Date, the
Cash Collateral Account shall be established with the New York office of
Trustee. Servicer shall give prior written notice to Bond Insurer of (i) the
establishment of a new Cash Collateral Account or (ii) a change in the location
of the Cash Collateral Account. Trustee shall possess all right, title and
interest in all funds on deposit from time to time in the Cash Collateral
Account and in all proceeds thereof. The Cash Collateral Account shall be
under the sole dominion and control of Trustee for the benefit of the
Certificateholders and Bond Insurer. If, at any time, the institution holding
the Cash Collateral Account (other than the Corporate Trust Office of Trustee)
ceases to be an Eligible Institution, Trustee shall within 10 Business Days
establish a new Cash Collateral Account meeting the conditions specified above
with another Eligible Institution (or the Corporate Trust Office of Trustee),
transfer any cash and/or any investments to such new Cash Collateral Account,
and from the date such new Cash Collateral Account is established it shall be
the "Cash Collateral Account." Trustee at the written direction of Servicer
shall make withdrawals from the Cash Collateral Account at such time and for
the purposes set forth in this Section 4.05 (each a "Cash Collateral
Withdrawal"). Cash Collateral Withdrawals shall be made in the priority set
forth below and the Available Amount will be reduced by the amount of each such
Cash Collateral Withdrawal. Servicer shall not be entitled to any amounts with
respect to the Cash Collateral Account. Seller shall not be entitled to any
amounts with respect to the Cash Collateral Account, except as set forth below
in Section 4.05(h).
(e) Funds on deposit in the Cash Collateral Account shall at the
written direction of Servicer be invested by Trustee in Eligible Investments in
the name of Trustee for the benefit of the Certificateholders and Bond Insurer.
All such investments shall be held by Trustee or other depository for the
benefit of the Certificateholders and Bond Insurer. Funds held in the Cash
Collateral Account shall be invested in Eligible Investments that will mature
or otherwise will be available for withdrawal without penalty on each Payment
Date. All realized interest and other investment earnings (net of losses and
investment expenses) on funds in the Cash Collateral Account shall remain as
part of the Cash Collateral Account.
-41-
48
(f) In the event Trustee receives written notice from Letter of
Credit Bank or Bond Insurer that (i) the then current long-term unsecured debt
rating of Letter of Credit Bank is less than "A" by Standard & Poor's or "A" by
Xxxxx'x or revoked or withdrawn or (ii) there has been instituted by or against
Letter of Credit Bank a proceeding relating to bankruptcy, reorganization,
insolvency, liquidation, moratorium or any other proceeding affecting the
enforcement or creditors' rights and remedies generally (the date of receipt by
Trustee of such notice, the "Termination Date"), and such Letter of Credit is
not replaced by Servicer with a Letter of Credit acceptable to Bond Insurer
from a Letter of Credit Bank acceptable to Bond Insurer prior to the fifteenth
day immediately succeeding such Termination Date (or if such date is not a
Business Day, the next succeeding Business Day) on such fifteenth day, Trustee
shall make a drawing under the Letter of Credit in an amount equal to the
Available LOC Amount then in effect by delivering to Letter of Credit Bank, by
hand delivery, telex or facsimile transmission, the relevant drawing
certificate substantially in the form attached to the Letter of Credit,
appropriately completed, signed by a Responsible Officer and dated the date of
presentation thereof. The drawing certificate shall direct Letter of Credit
Bank to disburse the amount of such drawing to Trustee for deposit in the Cash
Collateral Account no later than 11:00 A.M. (New York time) on the next
succeeding Business Day. Following such disbursement, the Letter of Credit
shall terminate. In the event Trustee receives written notice from Letter of
Credit Bank that Letter of Credit Bank has elected to terminate the Letter of
Credit pursuant to Section 4.17 of the Letter of Credit Reimbursement
Agreement, Trustee, within one Business Day of its receipt of such written
notice, shall make a drawing under the Letter of Credit in an amount equal to
the Available LOC Amount then in effect by delivering to Letter of Credit Bank,
by hand delivery, telex or facsimile transmission, the relevant drawing
certificate substantially in the form attached to the Letter of Credit,
appropriately completed, signed by a Responsible Officer and dated the date of
persentation thereof. The drawing certificate shall direct Letter of Credit
Bank to disburse the amount of such drawing to Trustee for deposit in the Cash
Collateral Account no later than 11:00 A.M. (New York time) on the next
succeeding Business Day. Following such disbursement, the Letter of Credit
shall terminate.
(g) On each Deposit Date on which the Draw Amount is greater than
zero, Trustee, upon written instructions from Servicer delivered pursuant to
Section 4.05(c), shall, after taking into account all deposits from Letter of
Credit Bank pursuant to Section 4.05(c), make a Cash Collateral Withdrawal in
an amount equal to such Draw Amount. Such Cash Collateral Withdrawal, if any,
shall be immediately deposited by Trustee in the Investment Account in a timely
manner to permit the distribution of the same to the Class A Certificate
Account pursuant to Section 4.08(b).
(h) On the Stated Maturity, after making those distributions
described in Section 4.08(b)(i) through (xv), Trustee shall distribute any
amounts remaining in the Cash Collateral Account to Seller as Seller Amounts.
-42-
49
Section 4.06 Determination of Principal Amounts.
(a) Class A Certificate Principal Distributable Amount. The
amount required to be deposited as principal into the Class A Certificate
Account on each Deposit Date (the "Class A Certificate Principal Distributable
Amount") shall be an amount, as determined by Servicer in the Monthly Statement
on the Determination Date, equal to the sum of (i) the amount, if any, by which
the Aggregate Discounted Lease Contract Balance as of the beginning of business
on the first day of the Collection Period immediately preceding such Deposit
Date (plus the initial Aggregate Discounted Lease Contract Balance of any Lease
Contracts conveyed to the Trust during such Collection Period) exceeds the
Aggregate Discounted Lease Contract Balance as of the close of business on the
last day of such Collection Period and (ii) all Prepayment Penalties to the
extent deposited into the Investment Account with respect to the related
Determination Date pursuant to Section 2.03(d), but in no event more than the
Class A Certificate Investor Interest.
(b) Class A Certificate Principal Shortfall Carryover Amount. On
the Determination Date preceding each Payment Date, Servicer shall determine in
the Monthly Statement the amount of any Class A Certificate Principal Shortfall
Carryover for such Payment Date.
Section 4.07 Determination of Interest Amounts.
(a) Class A Certificate Interest Distributable Amount. The amount
required to be deposited as interest into the Class A Certificate Account on
each Deposit Date (the "Class A Certificate Interest Distributable Amount")
shall be an amount, as determined by Servicer in the Monthly Statement, equal
to interest accrued on the Certificate Balance (calculated as of the Business
Day immediately preceding such Deposit Date) of each Class A Certificate for
the applicable Accrual Period (or the Accrual Intervals comprising each such
Accrual Period) at the applicable Certificate Rate on the basis of a 360-day
year and the actual number of days elapsed during such Accrual Period;
provided, however, that with respect to any Class A Certificates issued on any
Subsequent Closing Date occurring since the preceding Payment Date, interest
shall be calculated with respect to each Accrual Interval based upon the actual
number of days elapsed during such Accrual Interval and the Certificate Balance
of such Class A Certificates.
(b) Class A Certificate Interest Shortfall Carryover Amount. On
the Determination Date preceding each Payment Date, Servicer shall determine in
the Monthly Statement the amount of any Class A Certificate Interest Shortfall
Carryover for such Payment Date.
Section 4.08 Collections and Allocations; Required Deposits.
(a) To the extent not theretofore accomplished and subject to
Section 4.05(g), Servicer shall deposit or cause to be deposited all
Collections received by it into the Investment Account as promptly as possible,
but in no event later than the second Business Day following its receipt of
such Collections.
-43-
50
(b) Deposits and Payments. On each Determination Date, Servicer
shall instruct Trustee pursuant to the Monthly Statement to, and Trustee shall,
apply or cause to be applied funds on deposit in the Investment Account on such
Determination Date (after taking into account any Cash Collateral Withdrawal to
be deposited therein on the next Deposit Date pursuant to Section 4.05(g)) to
make the following payments and deposits on the following dates and in the
following mandatory order of priority; provided, however, that the proceeds of
claims under the Policy shall be used solely to pay the amounts due under
clauses (viii) and (ix) below; and provided further that Trustee shall withdraw
from the Investment Account and make interest payments to the Class A
Certificateholders based on the Class A Certificate Investor Interest even if
it shall not have received the Monthly Statement:
(i) To Servicer, on the Payment Date, to the extent
of available funds, any Tax Amounts to be paid to Servicer under
Section 3.02;
(ii) To Servicer on the Payment Date, to the extent of
available funds derived from Collections from the related Lease
Contracts, any Servicer Advances not previously reimbursed;
(iii) To Servicer on the Payment Date, to the extent of
available funds, any portion of any Servicer Advances which Servicer
has certified to Trustee and Bond Insurer in the applicable Monthly
Statement that Servicer in good faith believes it will not be able to
recoup from subsequent Collections under the applicable Lease
Contracts.
(iv) To Servicer on the Payment Date, to the extent of
available funds, the Servicing Fee and all unpaid Servicing Fees from
prior Payment Dates;
(v) To Trustee on the Payment Date, to the extent of
available funds, the Trustee Fee and all unpaid Trustee Fees from
prior Payment Dates;
(vi) To Back-up Servicer on the Payment Date, to the
extent of available funds, the Back-up Servicer Fee and all unpaid
Back-up Servicer Fees from prior Payment Dates;
(vii) To Bond Insurer on the Payment Date, to the
extent of available funds, any Bond Insurer Premium then due and any
unpaid Bond Insurer Premium from prior Payment Dates, together with
interest thereon at the Late Payment Rate;
(viii) To the Class A Certificate Account on the Deposit
Date, to the extent of available funds, an amount equal to, without
duplication, the Class A Certificate Interest Distributable Amount and
any Class A Certificate Interest Shortfall Carryover amounts as of the
immediately preceding Payment Date;
-44-
51
(ix) To the Class A Certificate Account on the Deposit
Date, to the extent of available funds, an amount equal to, without
duplication, the Class A Certificate Principal Distributable Amount
and any Class A Certificate Principal Shortfall Carryover amounts as
of the immediately preceding Payment Date;
(x) To Bond Insurer on the Payment Date, to the
extent of available funds, of any amounts previously paid by Bond
Insurer under the Policy and not theretofore repaid, together with
interest thereon at the Late Payment Rate and any other amounts due
under the Insurance Agreement;
(xi) To pay to a Successor Servicer after a Successor
Servicer has been appointed pursuant to Section 9.02, the Additional
Servicer Fee, if any, and to pay any Successor Servicer, or Trustee or
Bond Insurer, any Transition Costs incurred by any Successor Servicer,
or Trustee or Bond Insurer and not previously reimbursed (in an amount
not to exceed $25,000 in the aggregate);
(xii) To reimburse Bond Insurer for any costs or
expenses incurred in connection with any enforcement action with
respect to this Agreement or the Certificates;
(xiii) If the Funding Period has terminated, to the
Class A Certificate Account on the Deposit Date, to the extent of
available funds, up to an amount equal to the lesser of (A) the
amount, if any, by which the Requisite LOC Amount exceeds the
Available Amount and (B) the Class A Certificate Investor Interest
(net of amounts referred to in (ix) above);
(xiv) To pay to any Successor Servicer, or Trustee or
Bond Insurer any Transition Costs in excess of the Transition Costs
reimbursed pursuant to clause (xi) incurred by any Successor Servicer,
or Trustee or Bond Insurer and not previously reimbursed; and
(xv) To Seller on the Payment Date, the amount, if
any, by which the balance of the funds on deposit in the Investment
Account on the last day of the Collection Period prior to such Payment
Date exceeds the aggregate of all payments made under clauses (i)
through (xiv) above.
Section 4.09 Account Agreements. Servicer hereby represents
and warrants to Trustee, Bond Insurer and the Certificateholders that Servicer
has heretofore given to Trustee, Bond Insurer and Centre Square true and
correct copies of all written agreements that constitute the entire agreements
relating to the Accounts (the "Account Agreements"), that the Account
Agreements have not been amended, supplemented or terminated, and that the
Account Agreements are still in full force and effect. Servicer shall not
amend, supplement or terminate any of the Account Agreements, enter into any
new agreements or understandings relating to the Accounts, or amend, supplement
or terminate any such new agreements or understandings, without the prior
consent of Trustee, Bond Insurer and Centre Square.
-45-
52
Section 4.10 Payments under the Policy. If on the close of
business on the third Business Day prior to any Payment Date, the sum of (i)
the funds on deposit in the Investment Account and available to be distributed
on such Payment Date pursuant to Section 4.08(b) and (ii) the Available Amount
are not sufficient (after taking into account the payments required to be made
on such Payment Date pursuant to Section 4.08(b)(i)-(vii)) to make the payment
of amounts due on the Class A Certificates on such Payment Date in accordance
with Section 4.08(b)(viii), the Trustee shall, no later than 12:00 noon, New
York time, on the second Business Day immediately preceding such Payment Date,
make a claim under the Policy in an amount equal to such insufficiency. In
addition, if on the close of business on the third Business Day immediately
prior to the Stated Maturity, the sum of (i) the funds on deposit in the
Investment Account and available to be distributed on such Payment Date
pursuant to Section 4.08(b) and (ii) the Available Amount are not sufficient
(after taking into account the payments required to be made on such Payment
Date pursuant to Section 4.08(b)(i)-(viii)) to pay in full the Class A
Certificate Investor Interest, the Trustee shall, not later than 12:00 noon,
New York time, on the second Business Day immediately preceding such Payment
Date, make a claim under the Policy in an amount equal to such insufficiency.
Proceeds of claims on the Policy shall be deposited in the Class A Certificate
Account and shall remain uninvested and shall be used solely to pay amounts due
in respect of interest on the Class A Certificates on each Payment Date and
principal of the Class A Certificates at the Stated Maturity.
In addition, on any day that the Trustee has actual knowledge or
receives notice that any amount previously paid to a Class A Certificateholder
has been subsequently recovered by a trustee from such Class A
Certificateholder pursuant to a final nonappealable order of a court of
competent jurisdiction that such payment constitutes a voidable preference
within the meaning of the United States Bankruptcy Code (11 U.S.C.), as amended
from time to time, to such Class A Certificateholder (a "Preference Claim"),
the Trustee shall make a claim within three Business Days upon the Policy for
the full amount of such Preference Claim in accordance with the terms of the
Policy. Any proceeds of any such Preference Claim received by the Trustee
shall be paid to the related Class A Certificateholder.
Section 4.11 Investment of Monies Held in the Investment
Account and the Cash Collateral Account. In the event that Trustee has not
received written directions from Servicer, Trustee shall invest any cash
amounts in the Investment Account and the Cash Collateral Account in
investments specified in clause (a) of the definition of Eligible Investments.
Trustee shall provide to Servicer and Bond Insurer monthly written confirmation
of such investments, describing the Eligible Investments in which such amounts
have been invested. Any funds in the Investment Account, the Class A
Certificate Account and the Cash Collateral Account not so invested must be
insured by the Federal Deposit Insurance Corporation to the limits established
by such corporation.
-46-
53
ARTICLE V
DISTRIBUTIONS AND REPORTS TO
CERTIFICATEHOLDERS
Section 5.01 Distributions to Certificateholders.
(a) On each Payment Date, the Trustee shall distribute, or shall
furnish to the Paying Agent for distribution, from the Class A Certificate
Account (in accordance with the Monthly Statement) the following amounts:
(i) to each Holder of a Class A Certificate of record
on the related Record Date, such Certificateholder's pro rata share
(based on the ratio of (a) the sum of the products of one-twelfth of
the Certificate Rate for each Class A Certificate held by such
Certificateholder times the Certificate Balance of such Class A
Certificate on such Payment Date (determined without giving effect to
payments of principal on such Payment Date under this Section 5.01),
to (b) the Class A Certificate Interest Distributable Amount) of the
amounts deposited into the Class A Certificate Account in respect of
the Class A Certificate Interest Distributable Amount and the Class A
Certificate Interest Shortfall Carryover; and
(ii) to each Holder of a Class A Certificate of record
on the related Record Date, such Certificateholder's pro rata share
(based on the aggregate Class A Certificate Investor Interest
represented by Class A Certificates held by such Certificateholder and
determined without giving effect to payments of principal on such
Payment Date under this Section 5.01) of the amounts deposited into
the Class A Certificate Account in respect of the Class A Certificate
Principal Distributable Amount, the Class A Certificate Principal
Shortfall Carryover and the Other Class A Principal Amount.
(b) [Intentionally omitted]
(c) On each Payment Date, Trustee shall distribute to Seller (in
accordance with the Monthly Statement) any amounts required to be distributed
to Seller pursuant to Sections 4.05(h) and Section 4.08(b)(xv).
(d) Distributions to Certificateholders hereunder shall be made by
check mailed to each Certificateholder at such Certificateholder's address
appearing on the Certificate Register without presentation or surrender of any
Certificate or the making of any notation thereon or by wire transfer to such
depository account as the Holder directs Trustee in writing prior to the
relevant Record Date. Such distributions shall be made in immediately
available funds and except with respect to the final distribution, payment
shall be made without presentation or surrender of the Certificates.
Distributions to Seller hereunder shall be made by check mailed to Seller at
Seller's
-47-
54
address appearing on Trustee's books or by wire transfer of immediately
available funds to such depository account as Seller directs Trustee in writing
prior to the relevant Record Date.
Section 5.02 Annual Certificateholders' Tax Statement. On or
before January 25 of each calendar year, beginning with calendar year 1998,
Servicer shall cause the Paying Agent to furnish to each Person who at any time
during the preceding calendar year was a Certificateholder a statement prepared
by Servicer showing the total amount of principal and interest distributed to
each Certificateholder during the preceding calendar year or the applicable
portion thereof during which such Person was a Certificateholder, together with
such other customary information (consistent with the treatment of the
Certificates as debt for federal and state income tax purposes) as may be
necessary or desirable to enable the Certificateholders to prepare their tax
returns. Such obligations of the Paying Agent shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by, or caused to be provided by, Servicer pursuant to any requirements
of the Internal Revenue Code as from time to time in effect.
ARTICLE VI
THE CERTIFICATES
Section 6.01 The Certificates. The Certificates shall be
substantially in the form of Exhibit A and shall, upon issuance, be executed by
Seller and delivered to Trustee for authentication and delivery as provided in
Section 6.02. The Certificates shall be issuable only in Authorized
Denominations. Each Certificate shall be executed by manual or facsimile
signature on behalf of Seller by its authorized agent (by manual or facsimile
signature). Certificates bearing the manual or facsimile signature of the
individual who was, at the time when such signature was affixed, authorized to
sign on behalf of Seller or Trustee shall not be rendered invalid,
notwithstanding that such individual has ceased to be so authorized prior to
the authentication and delivery of such Certificates or does not hold such
office at the date of such Certificates. No Certificate shall be entitled to
any benefit under this Agreement, or be valid for any purpose, unless there
appears on such Certificate a certificate of authentication substantially in
the form provided for herein executed by or on behalf of Trustee by the manual
signature of a duly authorized signatory, and such certificate upon any
Certificate shall be conclusive evidence, and the only evidence, that such
Certificate has been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication.
Section 6.02 Authentication of Certificates.
(a) Contemporaneously with the assignment and transfer of the
applicable Trust Assets to the Trust on each Closing Date and after
satisfaction of the conditions precedent set forth in the Purchase Agreement, a
Responsible Officer of Trustee shall authenticate and deliver the Class A
Certificates as directed by a written order of Seller.
-48-
55
(b) Contemporaneously with the transfer of the applicable Trust
Assets to the Trust on the Initial Closing Date, a Responsible Officer of
Trustee shall authenticate and deliver to Seller the Seller Certificate.
Section 6.03 Registration of Transfer and Exchange of
Certificates. Trustee shall cause to be kept at the office or agency to be
maintained by a transfer agent and registrar (the "Transfer Agent and
Registrar") in accordance with the provisions of Section 10.15 a register (the
"Certificate Register") in which, subject to such reasonable regulations as it
may prescribe, the Transfer Agent and Registrar shall provide for the
registration of the Certificates and of transfers and exchanges of the
Certificates as herein provided. Trustee is hereby initially appointed
Transfer Agent and Registrar for the purpose of registering the Certificates
and transfers and exchanges of the Certificates as herein provided. Trustee
shall be permitted to resign as Transfer Agent and Registrar upon 30 days'
written notice to the Servicer and Bond Insurer. In the event that the Trustee
shall no longer be the Transfer Agent and Registrar, Trustee shall appoint a
successor Transfer Agent and Registrar acceptable to Bond Insurer.
Each permitted transfer hereunder shall be accomplished by surrender
of such Certificates for registration of transfer at the Corporate Trust
Office. Upon surrender for registration of transfer of any Class A Certificate
at any office or agency of the Transfer Agent and Registrar maintained for such
purpose, Seller shall execute, and Trustee shall authenticate and deliver, in
the name of the designated transferee or transferees, one or more new Class A
Certificates in Authorized Denominations of like aggregate amount.
At the option of a Certificateholder, Class A Certificates may be
exchanged for other Class A Certificates of Authorized Denominations of like
aggregate amount, upon surrender of the Certificates to be exchanged at any
such office or agency. Whenever any Certificates are so surrendered for
exchange, Seller shall execute, and Trustee shall authenticate and deliver, the
Certificates which the Certificateholder making the exchange is entitled to
receive. Every Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer
in a form satisfactory to Trustee and the Transfer Agent and Registrar duly
executed by the Certificateholder thereof or his attorney duly authorized in
writing.
No service charge shall be made to the Certificateholders for any
registration of transfer or exchange of Certificates, but the Transfer Agent
and Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Certificates.
All Certificates surrendered for registration of transfer and exchange
shall be canceled and disposed of or held in accordance with the Trustee's
standard retention policy.
Each Certificateholder, by acceptance of its Certificates, agrees that
the Certificates shall be limited recourse obligations of Seller payable from
the Trust Assets, including any proceeds or payments made with respect to the
Policy.
-49-
56
All fees and expenses of the Transfer Agent and Registrar shall be
borne and paid by Trustee.
Section 6.04 Restrictions on Transfer of Certificates.
Notwithstanding anything to the contrary contained in this Agreement, no
transfer or exchange of any Certificate or any beneficial interest therein may
be made unless Servicer shall have reasonably determined that such transfer (i)
is made pursuant to an exemption from the registration requirements of the
Securities Act, and is exempt from any applicable state securities or "Blue
Sky" laws (or any requirements thereof have been complied with), (ii) would not
cause the Trust or Trustee to be in violation of the Investment Company Act or
require the Trust or Trustee to register as an investment company under the
Investment Company Act, and (iii) would not be in violation of ERISA or make
assets of the Trust "plan assets" under ERISA. In the event that such a
transfer is to be made, Servicer or Trustee shall require, in order to assure
compliance with the Securities Act, the Investment Company Act, ERISA and
applicable state securities or "Blue Sky" laws, that any prospective transferee
execute and deliver to Servicer, Bond Insurer and Trustee a written
certificate, in the form of Exhibit F, as to the facts surrounding such
transfer. Servicer, Bond Insurer or Trustee may also require an Opinion of
Counsel reasonably satisfactory to each of them that such transfer may be made
pursuant to an exemption from the Securities Act and applicable state
securities or "Blue Sky" laws (or in compliance therewith), that such transfer
would not be or result in a violation of ERISA or make assets of the Trust
"plan assets" under ERISA and that such transfer would not result in a
violation of the Investment Company Act or require the Trust or Trustee to
register as an "investment company" under the Investment Company Act, which
Opinion of Counsel shall be delivered to Servicer, Bond Insurer and Trustee and
shall be an expense of the Certificateholder desiring to effect such transfer
or such Certificateholder's prospective transferee. Neither Servicer, any
Certificateholder, Trustee nor any other Person may register any Certificate
under the Securities Act or any other securities law.
Section 6.05 Mutilated, Destroyed, Lost or Stolen
Certificates. If (a) any mutilated Certificate is surrendered to the Transfer
Agent and Registrar, or the Transfer Agent and Registrar receives evidence to
its satisfaction of the destruction, loss or theft of any Certificate and (b)
there is delivered to the Transfer Agent and Registrar, Bond Insurer and
Trustee such security or indemnity as may be reasonably required by them to
save each of them harmless, then, in the absence of notice to Trustee that such
Certificate has been acquired by a bona fide purchaser, Seller shall execute
and Trustee shall authenticate and the Transfer Agent and Registrar shall
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate of like class, tenor and denomination.
In connection with the issuance of any new Certificate under this Section 6.05,
Trustee or the Transfer Agent and Registrar may require the payment by the
Certificateholder of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses
(including the fees and expenses of Trustee and the Transfer Agent and
Registrar) connected therewith. Any duplicate Certificate issued pursuant to
this Section 6.05 shall constitute complete and indefeasible evidence of
ownership in the Trust, as if originally issued, whether or not the lost,
stolen or destroyed Certificate shall be found at any time.
-50-
57
Section 6.06 Persons Deemed Owners. Prior to due presentation
of a Certificate for registration of transfer, Trustee, the Paying Agent, the
Transfer Agent and Registrar, Bond Insurer and any agent of any of them may
treat the person in whose name any Certificate is registered as the owner of
such Certificate for the purpose of receiving distributions pursuant to Section
5.01 and for all other purposes whatsoever, and neither Trustee, the Paying
Agent, the Transfer Agent and Registrar, Bond Insurer nor any agent of any of
them shall be affected by any notice to the contrary.
Section 6.07 Appointment of Paying Agent.
(a) The Trustee may appoint one or more Paying Agents acceptable
to Bond Insurer. The Paying Agent shall make distributions provided by Trustee
to Certificateholders from the Class A Certificate Account pursuant to Section
5.01 and shall report the amounts of such distributions to Trustee. Any Paying
Agent shall have the revocable power to request the withdrawal of funds from
the Class A Certificate Account for the purpose of making distributions
referred to above. If the Paying Agent is not Trustee, Trustee may revoke such
power and remove the Paying Agent, if Trustee determines in its sole discretion
that the Paying Agent shall have failed to perform its obligations under this
Agreement in any material respect and shall revoke such power and remove the
Paying Agent at the written direction of Bond Insurer. The Paying Agent shall
initially be Trustee. The provisions of Sections 10.01, 10.02 and 10.03 shall
apply to Trustee also in its role as Paying Agent, for so long as Trustee shall
act as Paying Agent.
(b) Trustee shall cause any Paying Agent (other than itself) to
execute and deliver to Trustee an instrument in which such Paying Agent shall
agree with Trustee that such Paying Agent will hold all sums, if any, held by
it for payment to the Certificateholders in trust for the benefit of the
Certificateholders entitled thereto until such sums shall be paid to such
Certificateholders and shall agree that it shall comply with all requirements
of the Internal Revenue Code of 1986, as amended, regarding the withholding of
payments in respect of Federal income taxes due from Holders by Trustee or
Servicer. Trustee agrees, if it is the Paying Agent hereunder, to comply with
the foregoing covenants.
(c) All fees and expenses of the Paying Agent shall be borne and
paid by Trustee.
Section 6.08 Access to List of Certificateholders' Names and
Addresses. Trustee will furnish or cause to be furnished by the Transfer Agent
and Registrar to Servicer, Bond Insurer or the Paying Agent, within five
Business Days after receipt by Trustee of a request therefor from Servicer,
Bond Insurer or the Paying Agent, respectively, in writing, a list in such form
as Servicer, Bond Insurer or the Paying Agent may reasonably require, of the
names and addresses of the Certificateholders as of the most recent Record Date
for payment of distributions to Certificateholders. If Holders of Certificates
(the "Applicants") evidencing not less than 10% of the Class A Certificate
Investor Interest apply in writing to Trustee, and such application states that
the Applicants desire to communicate with other Certificateholders with respect
to their rights under this Agreement or under the Certificates and is
accompanied by a copy of the communication which
-51-
58
such Applicants propose to transmit, then Trustee, after having been adequately
indemnified by such Applicants for its costs and expenses, shall afford or
shall cause the Transfer Agent and Registrar to afford such Applicants access
during normal business hours to the most recent list of Certificateholders held
by Trustee and shall give Servicer and Bond Insurer notice that such request
has been made, within five Business Days after the receipt of such application.
Such list shall be as of a date no more than 45 days prior to the date of
receipt of such Applicants' requests. Every Certificateholder, by receiving
and holding a Certificate, agrees with Trustee that neither Trustee, the
Transfer Agent and Registrar, nor any of their respective agents shall be held
accountable by reason of the disclosure of any such information as to the names
and addresses of the Certificateholders hereunder, regardless of the source
from which such information was obtained.
Section 6.09 Authenticating Agent. (a) Trustee may appoint
one or more authenticating agents with respect to the Certificates that shall
be authorized to act on behalf of Trustee in authenticating the Certificates in
connection with the registration of, transfer, exchange or repayment of the
Certificates. Whenever reference is made in this Agreement to the
authentication of Certificates by Trustee or Trustee's certificate of
authentication, such reference shall be deemed to include authentication on
behalf of Trustee by its duly authorized authenticating agent and a certificate
of authentication executed on behalf of Trustee by such an authenticating
agent.
(b) Any Person into which the authenticating agent 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 authenticating agent shall
be a party, or any Person succeeding to the corporate trust business of the
authenticating agent, shall be the successor of the authenticating agent
hereunder 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.
(c) An authenticating agent may at any time resign by giving
written notice of resignation to Trustee, Bond Insurer and to the Servicer.
Trustee may at any time terminate the agency of an authenticating agent by
giving notice of termination to such authenticating agent, Bond Insurer and to
the Servicer. Upon receiving such a notice of resignation or upon such a
termination, or in case at any time an authenticating agent shall cease to be
acceptable to Trustee or Bond Insurer, Trustee may and shall at the written
direction of Bond Insurer appoint a successor authenticating agent. Any
successor authenticating agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an authenticating agent.
No successor authenticating agent shall be appointed unless acceptable to
Trustee and Bond Insurer.
(d) Trustee agrees to bear and pay all fees and expenses of any
such authenticating agent.
(e) The provisions of Sections 10.01, 10.02 and 10.03 shall be
applicable to any authenticating agent.
-52-
59
(f) If an authenticating agent shall have been appointed pursuant
to this Section 6.09, the Certificates may have endorsed thereon, in addition
to Trustee's certificate of authentication, an alternate certificate of
authentication in substantially the following form:
This is one of the Certificates referred to in the within-mentioned
Pooling and Servicing Agreement.
______________________________________
as Authenticating Agent
for Trustee,
By:___________________________________
Authorized Signatory
Section 6.10 Non-Petition. Each Certificateholder, by
receiving and holding a Certificate agrees that so long as this Agreement is in
effect and for one year and one day after its termination, neither it nor any
Affiliate thereof will file any involuntary petition or otherwise institute any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding
or other proceeding under any federal or state bankruptcy or similar law
against Seller.
ARTICLE VII
MATTERS RELATING
TO SELLER
Section 7.01 Representations and Warranties Regarding Seller.
Seller hereby represents and warrants to the Trust, Trustee, Bond
Insurer and each Certificateholder:
(a) Organization and Good Standing. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York, with full power and authority to own its properties and to conduct
its business as presently conducted, and to execute, deliver, and perform its
obligations under the Principal Agreements.
(b) Due Qualification. Seller is duly qualified to do business as
a foreign corporation and is in good standing, and has obtained all necessary
licenses and approvals in all states in which the ownership or lease of its
property or the conduct of its business requires such qualification, except to
the extent that the failure to so qualify or obtain such licenses and approvals
would not, in the aggregate, materially adversely affect the ability of Seller
to perform its obligations under the Principal Agreements.
-53-
60
(c) Power and Authority. Seller has the power and authority and
legal right (including all requests, approvals, licenses and permits) to
execute and deliver the Principal Agreements and to carry out their respective
terms; Seller has duly authorized the transfer of all of its right, title and
interest in and to the assets assigned and encumbered pursuant to Sections
2.01(c) and (d) by all necessary action; and the execution, delivery, and
performance of the Principal Agreements have been duly authorized by Seller by
all necessary action.
(d) No Violation. The execution and delivery of the Principal
Agreements, the Certificates and each conveyance of Trust Assets, the
consummation of the transactions contemplated hereby and thereby and the
fulfillment of the terms thereof 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) a default under, or require any consent or approval under (as
applicable) the organizational documents of Seller, or any term of any
agreement or other instrument to which Seller is a party or by which it is
bound, or result in the creation or imposition of any Lien upon any of its
material properties pursuant to the terms of such agreement or other
instrument, other than any Lien created or imposed pursuant to the terms of any
Principal Agreement, or violate any law or, to the best of Seller's knowledge,
any material order, rule or regulation applicable to the Seller of any court or
of any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over Seller or any of its
properties.
(e) Principal Place of Business. Seller's principal place of
business and chief executive office is in Rockland County, New York at the
address set forth in this Agreement, and there are no other such locations.
(f) Binding Obligation. Each of the Principal Agreements has been
duly authorized, executed and delivered by Seller, and each constitutes a
legal, valid and binding obligation of Seller enforceable against Seller in
accordance with their respective terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect affecting the enforcement of
creditors' rights in general, and the availability of equitable remedies.
(g) No Consent. No consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with any court or
Governmental Authority having jurisdiction over Seller or any of its properties
or assets is required to be obtained by or with respect to Seller in connection
with the execution, delivery and performance by it of the Principal Agreements
and the consummation of the transactions contemplated hereby and thereby.
(h) No Proceedings. There are no proceedings or investigations
pending, or to the knowledge of Seller threatened, before any court or
Governmental Authority (i) asserting the invalidity of any of the Principal
Agreements, (ii) seeking to prevent the consummation of any of the transactions
contemplated by any of the Principal Agreements or (iii) seeking a
determination or ruling that might materially adversely affect the performance
by Seller of its obligations hereunder or thereunder or the validity or
enforceability of any of the Principal Agreements.
-54-
61
(i) Solvency. Seller is solvent and will not become insolvent
after giving effect to the transactions contemplated by the Principal
Agreements; Seller has not incurred any indebtedness or other payment
obligations; and Seller, after giving effect to the transactions contemplated
by the Principal Agreements, will have an adequate amount of capital to conduct
its business in the foreseeable future.
(j) Other Business. Seller has not engaged in any business or
incurred any liabilities or obligations other than as set forth in the
Principal Agreements.
(k) Injunctions. There is no outstanding injunction, writ,
restraining order or other order of any nature that adversely affects Seller's
performance of its obligations under the Principal Agreements or the
consummation of the transactions contemplated thereby.
(l) Compliance. Seller is in compliance with all applicable laws,
rules, regulations, and orders with respect to the Seller, its business and
properties and all of its Lease Contracts and Equipment.
(m) Returns. Seller has filed on a timely basis all required tax
returns.
(n) Name. The legal name of the Seller is as set forth in this
Agreement, and the Seller has no tradenames, fictitious names, assumed names or
"doing business as" names.
(o) Subsidiaries. The Seller has no subsidiaries.
(p) Parent of Seller. Rockford is the registered owner of all of
the issued and outstanding common stock of the Seller, all of which common
stock has been validly issued, is fully paid and nonassessable and is owned of
record, free and clear of all mortgages, assignments, pledges, security
interests, warrants, options and rights to purchase.
(q) Equipment and Lease Purchase Agreement. Seller has entered into
the Equipment and Lease Purchase Agreement with Rockford from whom it has
acquired the initial Trust Assets on the Closing Date, and from which it will
acquire additional Trust Assets on Subsequent Closing Dates, and the
representations and warranties made by Rockford relating to the Trust Assets
have been, and on each Subsequent Closing Date will be, validly assigned to and
are for the benefit of Seller, Trustee, the Trust, Bond Insurer and
Certificateholders and such representations and warranties are true and correct
in all material respects.
(r) Bulk Transfer Laws. The transfer, assignment and conveyance
of the Trust Assets by Seller pursuant to this Agreement is not subject to the
bulk transfer or any similar statutory provisions in effect in any applicable
jurisdiction.
-55-
62
(s) The Lease Contracts. Seller hereby restates and makes each of
the representations and warranties with respect to the Lease Contracts that are
made by Rockford in Section 3.02 of the Equipment and Lease Purchase Agreement.
(t) Separate Existence. Seller is operated in such a manner that
it would not be substantively consolidated in the trust estate of any
Affiliate, such that the separate existence of Seller and Affiliate would be
disregarded, in the event of a bankruptcy or insolvency of Affiliate, and in
such regard:
(A) Seller is a corporation whose activities are
restricted in its certificate of incorporation, a true and complete
copy of which has been delivered to Trustee and Bond Insurer pursuant
to the Purchase Agreement and such document has not been amended since
the date of such delivery;
(B) no Affiliate of Seller is involved in the
day-to-day management of the Seller;
(C) other than the activities undertaken pursuant to
this Agreement and the Equipment and Lease Purchase Agreement, Seller
engages in no transactions with any Affiliate;
(D) Seller maintains separate corporate records and
books of account from each Affiliate and otherwise observes corporate
formalities and has a separate business office for each Affiliate,
including Rockford;
(E) the financial statements and books and records of
each of its Affiliates prepared after the Initial Closing Date will
reflect the separate existence of Seller;
(F) Seller maintains its assets separately from the
assets of any other Affiliate (including through the maintenance of a
separate bank account), and Seller's funds and assets, and records
relating thereto, have not been and are not commingled with those of
any Affiliate;
(G) no Affiliate (1) pays Seller's expenses, (2)
guarantees Seller's obligations, or (3) advances funds to Seller for
the payment of expenses or otherwise;
(H) no Affiliate acts as an agent of Seller in any
capacity (except as Servicer hereunder) and Seller does not act as
agent for any Affiliate, but instead presents itself to the public as
a corporation separate and apart from each of its other Affiliates,
independently engaged in the business of having contributed to it by
Rockford, and transferring undivided interests in, the Trust Assets;
and
-56-
63
(I) Seller will at all times be a corporation (1)
having at least one Independent Director who shall at no time be a
shareholder, director, officer or employee of any Affiliate, and (2)
the certificate of incorporation of which provides that Seller shall
not take any action requiring the unanimous consent of all directors
of Seller without the consent of the Independent Director;
(u) Sale or Absolute Assignment. For accounting purposes, Seller
will treat the sale of all Lease Receivables pursuant to this Agreement as a
sale, or absolute assignment, of its full right, title and ownership interest
in such Lease Receivables to Trustee and Seller has not in any other manner
accounted for the transactions in Lease Receivables by Seller contemplated
hereby.
(v) Taxes. Seller has filed on a timely basis all tax returns
(federal, state, and local) required to be filed and has paid or made adequate
provisions for the payment of all taxes, assessments, and other governmental
charges due from Seller.
(w) Material Information. All information heretofore or hereafter
furnished by or on behalf of Seller to Trustee, Bond Insurer and
Certificateholders in connection with this Agreement or any transaction
contemplated hereby is and will be true and complete in all material respects
and does not and will not omit to state a material fact necessary to make the
statements contained therein not misleading.
The representations and warranties of Seller set forth in this Section
7.01 shall be deemed to be remade, without further act by any Person, on and as
of each Closing Date.
ARTICLE VIII
ADDITIONAL MATTERS RELATING
TO SELLER
Section 8.01 Covenants of Seller.
(a) Security Interests. Seller hereby covenants that it will not
sell, pledge, assign or transfer to any other Person, or grant, create, incur,
assume or suffer to exist any Lien on any Trust Assets now existing or
hereafter created, or any interest therein prior to the termination of this
Agreement pursuant to Article XI; and Seller shall defend the right, title and
interest of the Trust in, to and under the applicable Trust Assets now existing
or hereafter created, against all claims of third parties.
(b) Preservation of Security Interest. Seller shall execute and
cause Servicer to file such continuation statements, certificate of title
documents and any other documents requested by Trustee or Bond Insurer or which
may be required by law to fully preserve and protect the interest of the Trust
and Trustee in the Trust Assets.
-57-
64
(c) Maintenance of Office, etc. Seller will not, without
providing at least thirty (30) days prior written notice to Trustee and Bond
Insurer and without filing such amendments to any previously filed financing
statements or certificates of title as Trustee or applicable law may require,
(i) change the location of its principal executive office, or (ii) change its
name, identity or corporate structure in any manner which would make any
financing statement or continuation statement filed by Servicer in accordance
with this Agreement seriously misleading or otherwise ineffective under the UCC
or other relevant laws.
(d) Further Assurances. Seller will make, execute or endorse,
acknowledge, and file or deliver to Trustee from time to time such schedules,
confirmatory assignments, conveyances, transfer endorsements, powers of
attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Trust Assets as Trustee or Bond Insurer may
request and reasonably require.
(e) Notice of Liens. Seller shall notify Trustee and Bond Insurer
promptly after becoming aware of any Lien on any Trust Asset.
(f) Rights. Seller will enforce its rights under the Equipment
and Lease Purchase Agreement.
(g) Obligations with Respect to Lease Contracts. Seller will duly
fulfill all obligations on its part to be fulfilled under or in connection with
each Lease Contract and will do nothing to impair the rights of the Trust in
the Lease Receivables, the Lease Contracts and any other Trust Assets. As long
as there is no event of default under the applicable Lease Contract, Seller
will not disturb the Lessee's quiet and peaceful possession of the related
Equipment and the Lessee's unrestricted use thereof for its intended purpose.
(h) Compliance with Law. Seller will comply, in all material
respects, with all acts, rules, regulations, orders, decrees and directions of
any governmental authority applicable to the Lease Contracts or any part
thereof; provided, however, that Seller may contest any act, regulation, order,
decree or direction in any reasonable manner which shall not materially and
adversely affect the rights of the Trust in the Lease Receivables, the
Contracts, the Trust Assets or the related Equipment. Seller will comply, in
all material respects, with all requirements of law applicable to Seller.
(i) Consolidated Return. Seller and Rockford are members of an
affiliated group within the meaning of section 1504 of the Internal Revenue
Code of 1986, as amended, which has filed, and will continue to file, a
consolidated return for federal income tax purposes at all times until the
termination of this Agreement.
(j) Preservation of the Equipment. Seller warrants that with
respect to each Lease Receivable transferred by Seller to the Trust, at the
time of such transfer, Seller was the lawful owner and possessor of the
Equipment related to such Lease Receivable (except with respect to
-58-
65
Equipment in which it has a valid security interest) and that it will warrant
and defend such Equipment against all Persons, claims and demands whatsoever.
Seller shall not assign, sell, pledge, or exchange, or in any way encumber or
otherwise dispose of the Equipment, except as permitted under this Agreement.
(k) Taxable Income from the Lease Contracts. Seller shall treat
the Lease Contracts as owned by it for federal income tax purposes, and the
affiliated group of which Seller is a member within the meaning of section 1504
of the Internal Revenue Code of 1986, as amended, shall treat the Lease
Contracts as owned by Seller for federal income tax purposes and shall report
and include in gross income for federal, state and local income tax purposes in
its consolidated or combined return the rental and other income from the Lease
Contracts and deduct the interest paid or accrued, in accordance with the
applicable method of accounting for federal income tax purposes, with respect
to the Class A Certificates.
(l) Use of Proceeds. The proceeds from the sale of the
Certificates will be used by Seller to pay existing indebtedness of Rockford
that was secured by Lease Contracts transferred to Seller on the Initial
Closing Date or on any Subsequent Closing Date, pay the expenses associated
with the issuance of the Certificates and the funding of the accounts described
in Article IV hereof, and for general corporate purposes, including the payment
of administrative expenses and dividends.
Section 8.02 Indemnification of the Trust, Trustee, Bond
Insurer, Back-up Servicer and Certificateholders. Rockford shall indemnify and
hold harmless the Trust, Trustee, Bond Insurer, Back-up Servicer and each
Certificateholder and their respective officers, directors, employees and
agents from and against any loss, liability, expense, damage or injury suffered
or sustained by reason of any acts, omissions or alleged acts or omissions of
Servicer or Seller with respect to the Trust pursuant to this Agreement or,
without gross negligence or bad faith on the part of Trustee, arising out of
Trustee's acceptance and administration of its trust hereunder, and from and
against any taxes that may at any time be assessed against Trustee or the Trust
with respect to the transactions contemplated herein, including, without
limitation, any sales, gross receipts, general corporation, tangible personal
property, privilege or license tax and expenses in defending against the same,
including, but not limited to, any judgment, award, settlement, reasonable
attorneys' fees and other costs or expenses incurred in connection with the
defense of any actual or threatened action, proceeding or claim. Any such
indemnification shall not be payable from the assets of the Trust. The
provisions of this Section 8.02 shall run directly to and be enforceable by an
injured party subject to the limitations hereof, and the obligations of Seller
under this Section 8.02 shall survive the termination of the Trust. THE
INDEMNIFICATION PROVIDED TO EACH INDEMNIFIED PARTY IN THIS SECTION 8.02 IS
INTENDED TO BE APPLICABLE TO THE FULLEST EXTENT PERMITTED BY LAW AND SHALL
PROTECT EACH SUCH INDEMNIFIED PARTY EVEN IF SUCH INDEMNIFIED PARTY IS
NEGLIGENT. Rockford shall pay any amounts owing under this Section 8.02
directly to such indemnified Person and such amounts shall not be deposited in
any Account. The obligations of Rockford pursuant to this Section 8.02 shall
survive the termination of the Trust.
-59-
66
Section 8.03 Additional Obligations.
(a) Seller agrees to hold in trust for the Trust and remit to
Servicer any payments received by Seller in respect of the Trust Assets within
one Business Day after receipt thereof by Seller.
(b) Seller shall not, without the prior consent of Bond Insurer,
(i) consent to any amendment of the Equipment and Lease Purchase Agreement,
(ii) consent to any assignment of any rights of Servicer hereunder (except as
specifically permitted hereunder), or (iii) amend its certificate of
incorporation.
(c) Seller covenants and agrees that it shall not have the
authority to (or no shareholder shall have authority to cause Seller to):
(i) engage in any business or activity other than in
connection with, or relating to, or the carrying out of, the
activities described in Article SECOND of Seller's certificate of
incorporation;
(ii) incur any other indebtedness or assume or
guaranty any indebtedness of any other person or entity;
(iii) merge or consolidate with or convey or transfer
its properties and assets substantially as an entity to any Person,
other than to an Affiliate of Seller, without obtaining the unanimous
consent of its board of directors, which consent must include the
consent of the Independent Director and prior consent of Bond Insurer,
and any such merger or consolidation with, or conveyance or transfer
to, an Affiliate of Seller shall be subject to the following
conditions:
(A) the surviving or resulting corporation
shall be a corporation organized under the laws of the United
States or any state thereof and its certificate of
incorporation shall contain the same restrictions as are
contained in the Seller's certificate of incorporation;
(B) the surviving or resulting corporation
(if other than Seller) shall expressly assume by a supplement
to applicable Principal Agreements all of the Corporation's
liabilities and obligations thereunder;
(C) the consummation of such merger or
consolidation shall not result in the lowering of the rating
of the Certificates by any Rating Agency which is then rating
the Certificates; and
(D) such Affiliate shall be a newly-formed
corporation with no outstanding liabilities and shall be
acceptable to Bond Insurer.
-60-
67
(iv) institute proceedings to be adjudicated a
bankrupt or insolvent, or consent to the institution of bankruptcy or
insolvency proceedings against it, or file a petition or consent to a
petition seeking reorganization or relief under any applicable federal
or state law relating to bankruptcy, or consent to the appointment of
a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of Seller or a substantial part of its property, or
make any assignment for the benefit of creditors or, except as
required by law, admit in writing its inability to pay its debts
generally as they become due, or take any corporate action in
furtherance of any such action, without, in each case, the prior
unanimous consent of its board of directors, which consent must
include the consent of the Independent Director;
(v) amend, alter in any manner or delete any
provision of Seller's certificate of incorporation without obtaining
the unanimous consent of the Board of Directors, which consent must
include the consent of the Independent Director and the prior consent
of Bond Insurer; or
(vi) dissolve or liquidate, in whole or in part, if
any Certificates or obligations to the Insurer in connection
therewith are outstanding; or
(vii) enter into any amendment of any of the Principal
Agreements without the prior consent of Bond Insurer.
(b) Seller shall conduct its affairs in accordance with the
following provisions:
(i) Seller shall furnish to Trustee, Bond Insurer and
each Rating Agency copies of the form of each proposed amendment to
its Certificate of Incorporation at least ten (10) business days prior
to the proposed date of adoption of any such proposed amendment;
(ii) Seller will observe all customary formalities of
independent corporation existence;
(iii) Seller shall maintain separate corporate records
and books of account from those of Rockford and its other affiliates
(or any other Person or entity), and Seller shall not commingle its
funds or other assets with those of any Person or entity;
(iv) Seller shall hold appropriate meetings of its
board of directors and shareholders, or take actions by unanimous
written consent to the extent permitted by applicable law, to
authorize Seller's corporate actions;
(v) Seller shall at all times hold itself out to the
public (including, without limitation, to Rockford and the creditors
of Rockford), in Seller's own name, as a separate and distinct entity
from Rockford and its other affiliates;
-61-
68
(vi) Seller shall at all times ensure that its
capitalization is adequate in light of its business and purposes, and
shall not declare or pay any dividend or other distribution with
respect to its capital stock or make any payment on account of the
purchase, redemption or other acquisition or retirement of its capital
stock or any warrant, option or other right to acquire any such
capital stock, either directly or indirectly, pay or deliver or commit
to pay or deliver any monies or assets to Rockford or any other
affiliate whether in cash or other property of Seller, if the effect
thereof would be to leave Seller inadequately capitalized in light of
the nature of its business and its then anticipated capital
requirements to conduct its business as then being conducted or would
cause Seller to not have a positive net worth;
(vii) Seller will not engage in any business
transaction with any affiliate of Seller unless such transaction is
approved by its board of directors (including approval by the
Independent Director) as a transaction with terms and conditions
available at the time to Seller at least as favorable to Seller as for
comparable transactions on an arms' length basis with unaffiliated
Persons;
(viii) Seller will not guarantee, assume or become
liable for the obligations of Rockford or any of its other affiliates
(or any other Person or entity) or advance funds to, or accept funds
from, Rockford or any of its affiliates (or any other Person or
entity) for the payment of expenses, except as expressly provided in
the Principal Agreements and no shareholder shall guaranty, assume or
become liable for the obligations of the Seller, except as expressly
provided in the Agreements; and
(ix) Seller will not act as an agent of Rockford or
any of its other affiliates (or any other Person or entity) in any
capacity; and
(x) Seller will have no subsidiaries or any other
affiliate that is controlled by Seller
(d) At all times, at least one of the directors of Seller shall be
an Independent Director.
(e) Trustee, Bond Insurer and any Certificateholder and their
respective representatives shall at all times, upon reasonable prior notice,
have full and free access during normal business hours to all books,
correspondence and written and computer records of Seller as appropriate to
verify Seller's compliance with the Principal Agreements, and Trustee and such
Certificateholder and their representatives may examine and audit the same, and
make photocopies thereof, and Seller agrees to render to Trustee, Bond Insurer
and any such Certificateholder and their representatives, not at the expense of
Bond Insurer, such clerical and other assistance as may be reasonably requested
with regard thereto.
-62-
69
(f) Seller shall maintain separate corporate records and books of
account from those of Rockford and its Affiliates or any other Person and
Seller shall not commingle its funds or other assets with those of any other
Person.
(g) Seller will hold appropriate meetings of its Board of
Directors and stockholders, or take actions by unanimous written consent if
permitted by applicable law, to authorize Seller's corporate actions.
(h) Seller will at all times hold itself out to the public,
including Rockford, under Seller's own name, as a separate and distinct entity
from Rockford and its Affiliates.
(i) Seller will not (i) declare or pay any dividend or other
distribution with respect to its capital stock, (ii) make any payment on
account of the purchase, redemption or other acquisition or retirement of its
capital stock or any warrant, option or other right to acquire any such capital
stock, or (iii) either directly or indirectly, pay or deliver or commit to pay
or deliver any monies or assets to Rockford or any other Affiliate whether in
cash or other property of Seller, if the effect thereof would be to leave
Seller inadequately capitalized to conduct its business as then being conducted
or would cause Seller to not have positive net worth.
(j) Seller will not engage in business transactions with any
Affiliate unless it is approved by the Board of Directors (including approval
by the Independent Director as a transaction with terms and conditions
available at the time to Seller at least as favorable to Seller as for
comparable transactions on an arm's length basis with unaffiliated Persons and
entities.
(k) On or before April 30 of each year, beginning in 1998, Seller
shall deliver to Trustee, Bond Insurer and each Certificateholder an Officer's
Certificate certifying that Seller has, during the preceding year, (i) observed
all of the requirements of this Section 8.03, and (ii) observed all of the
requisite corporate formalities and conducted its business and operations in
such a manner as required for Seller to maintain its separate corporate
existence from any other entity.
(l) Seller shall operate its business and maintain its separate
corporate existence in a manner so that Seller will not be substantively
consolidated with Rockford and Seller's separate existence disregarded in event
of Rockford's bankruptcy.
(m) Seller shall at all times cause its certificate of
incorporation to provide that Seller's activities and business are limited to
the transactions contemplated by the Principal Agreements and activities
incidental thereto.
(n) Seller shall at all times cause the financial statements of
Rockford to reflect the separate corporate existence of Seller.
(o) Seller shall cause all of its business correspondence to
reflect that business is being conducted in Seller's own name.
-63-
70
Section 8.04 Servicer Reporting Requirements. (a) Servicer
will deliver to each Holder of outstanding Class A Certificates, Bond Insurer,
Back-up Servicer and Trustee (if different from Back-up Servicer):
(1) Quarterly Statements - within ninety (90) days
after the end of each of the first three quarterly fiscal periods in
each fiscal year of the Servicer commencing with the quarter ending
June 30, 1997, three copies of:
(A) a balance sheet of Servicer, as at the
end of such quarter, and
(B) a statement of income, retained earnings
and cash flow of Servicer for that quarter and for the portion
of the fiscal year ending with such quarter;
all accompanied by a certificate signed by a principal financial officer of
Servicer stating that such financial statements present fairly the financial
condition of Servicer and have been prepared in accordance with generally
accepted accounting principles consistently applied;
(2) Annual Statements -- within one hundred twenty
(120) days after the end of each fiscal year of Servicer commencing
with the fiscal year ending December 31, 1997, three copies of:
(A) a consolidated and consolidating balance
sheet of Servicer and its consolidated subsidiaries, with
consolidating schedules for each of its consolidated
subsidiaries at the end of that year, and
(B) consolidated and consolidating statements
of income, retained earnings and cash flow of Servicer and its
consolidated subsidiaries for that year, setting forth in each
case in comparative form the figures for the previous fiscal
year,
all in reasonable detail and accompanied by an opinion of a firm of Independent
Public Accountants stating that such financial statements present fairly the
financial condition of Servicer and its consolidated subsidiaries and have been
prepared in accordance with generally accepted accounting principles
consistently applied (except for changes in application in which such
accountants concur and footnote), and that the examination of such accountants
in connection with such financial statements has been made in connection with
generally accepted auditing standards, and included examining, on a test basis,
evidence supporting the amounts and disclosures on the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation;
(3) Notice of Event of Servicer Default,
Trigger Event and Funding Period Trigger Event -- immediately
upon becoming aware of the existence of any
-64-
71
condition or event which constitutes Servicer Default or a
Trigger Event or a Funding Period Trigger Event, a written
notice describing its nature and period of existence and what
action Servicer is taking or proposes to take with respect
thereto;
(4) Report on Proceedings -- promptly upon
Servicer's becoming aware of:
(i) any proposed or pending
investigation of it by any governmental authority
or agency, or
(ii) any court or administrative
proceeding which involves or may involve the
possibility of materially and adversely affecting
the properties, business, prospects, profits or
conditions (financial or otherwise) of Servicer,
a written notice specifying the nature of such
investigation or proceeding and what action the
Servicer is taking or proposes to take with
respect thereto and evaluating its merits; or
(iii) any notice from any agency or
governmental body having authority over the
conduct of its business that it is to cease and
desist, or to undertake, any practice, program,
procedure or policy employed by it in the conduct
of its business, and such cessation or
undertaking will materially adversely affect its
ability to perform its obligations hereunder; or
(iv) any litigation claiming damages in
excess of $100,000 from Servicer or which may
otherwise have a material adverse effect on the
business, financial condition, property or
prospects of the Servicer;
(5) Requested Information -- with reasonable
promptness, any other data and information which may be
reasonably requested by Bond Insurer or Trustee from time to
time, including without limitation any information required to
be made available at any time to any prospective transferee of
any Certificates in order to satisfy the requirements of Rule
144A under the Securities Act.
(6) Officer's Certificates -- With each set
of financial statements delivered pursuant to Section 8.04(a),
Servicer will deliver an Officer's Certificate stating (i)
that the officer signing such certificate has reviewed the
relevant terms of this Agreement and the Principal Agreements
to which Servicer is a party and has made, or caused to be
made under such officer's supervision, a review of the
activities of Servicer during the period covered by the
statements then being furnished, (ii) that the review has not
disclosed the existence of any Servicer Default or, if a
Servicer Default exists, describing its nature and what action
Servicer has
-65-
72
taken and is taking with respect thereto, and (iii) that on
the basis of such review the officer signing such certificate
is of the opinion that during such period Servicer has
serviced the Lease Contracts in compliance with the procedures
hereof except as described in such certificate.
(b) On or before each April 15, commencing April 15,
1998, so long as any of the Certificates are outstanding, Servicer shall
furnish to Bond Insurer and Trustee an Officer's Certificate either stating
that such action has been taken with respect to the recording, filing,
rerecording and refiling of any financing statements and continuation
statements as is necessary to maintain the interest of Trustee created by this
Agreement with respect to the Trust and reciting the details of such action or
stating that no such action is necessary to maintain such interests. Such
Officer's Certificate shall also describe the recording, filing, rerecording
and refiling of any financing statements and continuation statements that will
be required to maintain the interest of Trustee in the Trust until the date
such next Officer's Certificate is due. Servicer will use its best efforts to
cause any necessary recordings or filings to be made with respect to the Trust.
Section 8.05 Annual Independent Public Accountant's Servicing
Report; Annual Federal Tax Lien Search; Quarterly Re- underwriting.
(a) Servicer at its expense shall cause Independent
Public Accounts (who may also render and deliver other services to Servicer and
its Affiliates) to prepare a statement to Back-up Servicer, Trustee,
Certificateholders, Bond Insurer and Rating Agencies dated as of June 30, 1998,
and annually as of each June 30 thereafter, to the effect that the Independent
Public Accountants have examined the Servicing Procedures, manuals, guides and
records of Servicer, and the accounts and records of Servicer relating to the
Lease Contracts and the Lease Files (which procedures, manuals, guides and
records shall be described in one or more schedules to such statement), that
such Independent Public Accountants have compared the information contained in
the Monthly Statements delivered in the prior twelve months (except for the
initial report which shall be for the period from the Initial Closing Date to
June 30, 1998) with information contained in the accounts and records for such
period, and that, on the basis of such examination and comparison, nothing has
come to the Independent Public Accountant's attention to indicate that Servicer
has not, during the relevant period, serviced the Lease Contracts in compliance
with such Servicing Procedures, manuals and guides and in the same manner
required by Servicer's standards and with the same degree of skill and care
consistent with that which Servicer customarily exercises with respect to
similar contracts owned by it and otherwise in compliance with this Agreement,
that such accounts and records have not been maintained in accordance with the
Principal Agreements, that the information contained in the Monthly Statements
does not reconcile with the information contained in the accounts and records
or that such certificates, accounts and records have not been properly prepared
and maintained in all material respects or in accordance with the requirements
of this Agreement, except in each case for (a) such exceptions as the
Independent Public Accountant shall believe to be immaterial and (b) such other
exceptions as shall be set forth in such statement. On or before September 30
of each year, commencing on September 30, 1997, Servicer shall deliver to
Back-up Servicer, Trustee, Certificateholders and Bond Insurer a copy of such
statement.
-66-
73
(b) Promptly after the end of Servicer's fiscal year,
Servicer, at its expense, shall cause a search of any and all federal tax liens
against the affiliated group of which Seller and Rockford are members within
the meaning of Section 1504 of the Internal Revenue Code of 1986, as amended
(the "Affiliated Group") as of the end of such fiscal year to be conducted and
shall deliver to Back-up Servicer, Trustee, Bond Insurer and Certificateholders
on or before July 31 of each year, commencing July 31, 1997, an Officer's
Certificate signed by a Servicing Officer (i) stating that there are no
outstanding federal tax liens filed against any member of the Affiliated Group
or (ii) listing the outstanding federal tax liens filed against any member of
such Affiliated Group. In the event any such certificate shall disclose any
such federal tax liens, Servicer shall promptly thereafter, satisfy any such
federal tax liens.
(c) In accordance with the schedule set forth in the
next succeeding sentence, Servicer shall cause Independent Public Accountants
or other Persons acceptable to Bond Insurer to (1) re-underwrite a 10% sample
(or, at Seller's option, a sample size that will allow for a 99% confidence
level or such smaller sample as consented to by Bond Insurer in writing) of
Lease Contracts conveyed to the Trust since the prior re-underwriting review
and (2) contact the related Lessee and confirm in writing such Lessee's lease
obligations. Servicer shall cause the foregoing (collectively, a "Review") to
occur (i) monthly until the earlier to occur of (A) October 1997 or (B) the
month preceding the month in which the Initial Aggregate Certificate Principal
Balance exceeds $30,000,000; (ii) thereafter, during each month in which the
Initial Aggregate Certificate Principal Balance has increased by at least
$20,000,000 since the immediately preceding Review, until such time as the
Initial Aggregate Certificate Principal Balance exceeds $75,000,000; (iii)
thereafter, semi-annually.
Section 8.06 Filing. No later than the Initial Closing Date,
with respect to the Lease Contracts and Equipment purchased by the Trust on the
Initial Closing Date, and no later than the related Subsequent Closing Date
with respect to Lease Contracts and Equipment purchased by the Trust on the
such Subsequent Closing Date, Rockford and the Seller shall file UCC-1
financing statements or other lien perfection documents described in Section
2.04 of the Purchase Agreement. From time to time, Servicer shall take or
cause to be taken such actions and execute such documents as are necessary to
perfect and protect the Trust's, Bond Insurer's and Certificateholders'
interests in the Lease Contracts, and the Equipment owned by Seller against all
other Persons, including, without limitation, the filing of financing
statements or vehicle lien applications, amendments thereto and continuation
statements, the execution of transfer instruments and the making of notations
on or taking possession of all records or documents of title.
Section 8.07 Name Change or Relocation. If any change in
either Rockford's or Seller's name, identity, structure or the location of its
principal place of business or chief executive office occurs, then Rockford or
Seller, as the case may be, shall deliver ten (10) days prior written notice of
such change or relocation to Servicer, Bond Insurer, and Trustee and no later
than five (5) days after the effective date of such change or relocation,
Servicer shall file such amendments or
-67-
74
statements as may be required to preserve and protect Certificateholders' or
Bond Insurer's interests in the Trust Assets.
Section 8.08 Chief Executive Office. During the term of this
Agreement, Seller will maintain its chief executive office and principal place
of business in one of the States of the United States.
Section 8.09 Costs and Expenses. Servicer agrees to pay all
reasonable costs and disbursements in connection with the perfection and the
maintenance of perfection, as against all third parties, of the Trust's, Bond
Insurer's and Certificateholders' right, title and interest in and to the Trust
Assets.
ARTICLE IX
SERVICER DEFAULTS
Section 9.01 Servicer Defaults. If any one of the following
events (a "Servicer Default") shall occur:
(a) any failure by Servicer to endorse and deposit on a daily
basis the contents of the Lockbox Account pursuant to Section 4.02, to direct
the Lockbox Account Bank to make deposits in the Investment Account at the
times specified herein, to make any Servicer Advance in accordance with Section
3.03, to make any deposits to the Investment Account of Collections received or
required to be made by Servicer at the times specified herein, to give
instructions or notice to Trustee to make a required drawing under the Letter
of Credit or to make a Cash Collateral Withdrawal or to make the payments and
deposits on a Deposit Date in accordance with Section 4.08(b);
(b) failure on the part of Servicer to deliver the Monthly
Statement in accordance with Section 3.09;
(c) failure on the part of Servicer duly to observe or perform in
any material respect any other covenants or agreements of Servicer set forth in
this Agreement, which continues unremedied for a period of 30 days after the
date on which written notice of such failure, requiring the same to be
remedied, shall have been given to Servicer by the Trustee, or to Servicer and
Trustee by the Majority Certificateholders or Bond Insurer; or Servicer shall
delegate or attempt to delegate its duties under this Agreement;
(d) any representation, warranty or certification made by Servicer
in this Agreement or in any certificate delivered pursuant to this Agreement
shall prove to have been incorrect when made, which has a material adverse
effect on the rights of the Certificateholders or Bond Insurer or on the
ability of Servicer to perform its obligations hereunder and which continues to
be incorrect in any material respect for a period of 30 days after the date on
which written notice of such failure,
-68-
75
requiring the same to be remedied, shall have been given to Servicer by
Trustee, or to Servicer and Trustee by the Majority Certificateholders or Bond
Insurer;
(e) Servicer shall consent to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings of or relating to Servicer or of
or relating to all or substantially all of its property; or a decree or order
of a court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of its affairs, shall
have been entered against Servicer and such decree or order shall have remained
in force undischarged or unstayed for a period of 60 days; or Servicer shall
admit in writing its inability to pay its debts generally as they become due,
file a petition to take advantage of any applicable insolvency or
reorganization statute, make any assignment for the benefit of creditors or
voluntarily suspend payment of its obligations; a petition is filed against
Servicer seeking relief under the bankruptcy, arrangement, reorganization or
other debtor relief laws of the United States or any state or other competent
jurisdiction, and such petition, order, judgment or decree shall have remained
in force, undischarged or unstayed for a period of sixty (60) days after its
entry;
(f) in the case of Rockford while acting as Servicer, any of the
events referred to in Section 2.02(j), (k) or (l) of the Purchase Agreement
shall have occurred; or
(g) a Trigger Event shall have occurred;
provided, however, that if, after the Initial Cut-Off Date, Servicer shall
merge, consolidate or effect any other corporate structural change, including
without limitation any sale of the majority of its voting securities or
transfer of ownership, Bond Insurer shall have the right, in its sole
discretion, to modify the Servicer Defaults then, Trustee may or, at the
written direction of Bond Insurer, by notice then given in writing to Servicer
(a "Termination Notice"), shall terminate all of the rights and obligations of
Servicer as "Servicer" hereunder and in and to the Trust Assets and the
proceeds thereof. After receipt by Servicer of such Termination Notice, all
authority and power of Servicer under this Agreement shall, with the prior
written consent of Bond Insurer, pass to and be vested in the Back-up Servicer;
and, without limitation, Seller, Back-up Servicer and Trustee are hereby
authorized and empowered (upon the failure of Servicer to cooperate) to execute
and deliver, on behalf of Servicer, as attorney-in-fact or otherwise, all
documents and other instruments upon the failure of Servicer to execute or
deliver such documents or instruments, and to do and accomplish all other acts
or things necessary or appropriate to effect the purposes of such transfer of
servicing rights. Servicer agrees to cooperate with Seller, Back-up Servicer,
Bond Insurer and Trustee and any Successor Servicer in effecting the
termination of the responsibilities and rights of Servicer to conduct servicing
hereunder, including, without limitation, the transfer to such Successor
Servicer of all authority of Servicer to service the Trust Assets provided for
under this Agreement, and all authority over the Accounts and over all
Collections which shall on the date of transfer be held by Servicer for
deposit, or which have been deposited by Servicer in the Investment Account or
the Class A Certificate Account or which shall thereafter be received with
respect to the Trust Assets,
-69-
76
and in assisting the Successor Servicer and in enforcing all rights to
Insurance Proceeds. Servicer shall promptly transfer its Lease Management
System relating to the Trust Assets to the Successor Servicer in such
electronic form as the Successor Servicer may reasonably request, and shall
promptly transfer to the Successor Servicer all other records, the Lease Files,
correspondence and documents necessary for the continued servicing of the Trust
Assets in the manner and at such times as the Successor Servicer shall
reasonably request. To the extent that compliance with this Section 9.01 shall
require Servicer to disclose to the Successor Servicer information of any kind
which Servicer reasonably deems to be confidential, the Successor Servicer
shall be required to enter into such customary licensing and confidentiality
agreements as Servicer shall deem reasonably necessary to protect its interest.
Section 9.02 Back-up Servicer to Act; Appointment of
Successor. (a) On and after the receipt by Servicer of a Termination Notice
pursuant to Section 9.01, Servicer shall continue to perform all servicing
functions under this Agreement until a Successor Servicer acceptable to Bond
Insurer has assumed such servicing functions. Back-up Servicer has agreed to
the back-up servicing plan, attached hereto as Schedule 9.02, which plan may be
amended from time to time by mutual agreement of Trustee, Back-up Servicer and
Bond Insurer. Upon receipt by Servicer and Back-up Servicer of a Termination
Notice and consent from Bond Insurer, Back-up Servicer shall be deemed to have
been appointed and to have accepted appointment as "Successor Servicer" and
shall succeed to the rights and obligations of Servicer on the date specified
in the Termination Notice or as otherwise mutually agreed by Servicer, Trustee,
Back-up Servicer and Bond Insurer established pursuant to the preceding
sentence without further action on the part of any Person; provided, Back-up
Servicer shall have the right to designate a Successor Servicer to act as
Servicer in lieu of Back-up Servicer, subject to the approval of Bond Insurer.
In the event that Back-up Servicer shall be prohibited under applicable law or
shall otherwise fail to assume the duties of Servicer, or shall be terminated
as Servicer pursuant to Section 9.01, Bond Insurer may appoint a Successor
Servicer and if Bond Insurer fails to do so Trustee shall as promptly as
possible after the giving of a Termination Notice appoint a Successor Servicer
acceptable to Bond Insurer and such Successor Servicer shall accept its
appointment by written assumption in a form acceptable to Trustee and Bond
Insurer; any such Successor Servicer (other than Back-up Servicer) to be
subject to the approval of Bond Insurer. In the event that a Successor
Servicer has not been appointed and has not accepted its appointment at the
time when Servicer ceases to act as a Servicer, Trustee, without further
action, shall automatically be appointed the Successor Servicer, unless Trustee
shall be legally unable or shall be unwilling to so act, in which event Trustee
shall petition a court of competent jurisdiction to appoint and establish a
servicing entity having a net worth of not less than $1,000,000 and whose
regular business includes the servicing of leases of equipment and is
acceptable to Bond Insurer.
(b) Upon its appointment, Successor Servicer shall be the
successor in all respects to Servicer with respect to servicing functions under
this Agreement and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on Servicer by the terms and provisions
hereof, and all references in this Agreement to the Servicer shall be deemed to
refer to the
-70-
77
Successor Servicer and except that Servicer Advances shall be repayable to the
Servicer or Successor Servicer, as the case may be, that actually made such
Servicer Advances.
(c) In connection with such appointment and assumption, Trustee
shall be entitled to such compensation, or may make such arrangements for the
compensation of Successor Servicer out of Collections, as it and such Successor
Servicer shall agree; provided, no such compensation shall be in excess of that
provided in Section 3.08 unless agreed to in writing by Bond Insurer.
(d) All authority and power granted to Servicer or any Successor
Servicer under this Agreement shall automatically cease and terminate upon
termination of the Trust pursuant to Section 11.01 and shall pass to and be
vested in Seller and, without limitation, Seller is hereby authorized and
empowered to execute and deliver, on behalf of the Successor Servicer, as
attorney-in-fact or otherwise, all documents and other instruments, and to do
and accomplish all other acts or things necessary or appropriate to effect the
purposes of the transfer of servicing rights. The Successor Servicer agrees to
cooperate with Seller in effecting the termination of the responsibilities and
rights of the Successor Servicer to conduct servicing on the Trust Assets. The
Successor Servicer shall transfer its electronic records relating to the Trust
Assets to Seller in such electronic form as Seller may reasonably request and
shall transfer all other records, correspondence and documents to Seller in the
manner and at such times as Seller shall reasonably request.
Section 9.03 Notification to Certificateholders. Upon the
occurrence of any Servicer Default, Servicer shall give prompt written notice
thereof to Trustee and Bond Insurer, and Trustee thereupon shall give notice to
the Certificateholders at their respective addresses appearing in the
Certificate Register. Upon any termination or appointment of a Successor
Servicer pursuant to this Article IX, Trustee shall give prompt written notice
thereof to the Certificateholders at their respective addresses appearing in
the Certificate Register and to Bond Insurer.
Section 9.04 Waiver of Past Defaults. Bond Insurer or the
Majority Certificateholders, may with the prior written consent of the Bond
Insurer, on behalf of all Holders of Certificates, waive in writing any default
by Seller, Servicer or Successor Servicer in the performance of their
respective obligations hereunder and its consequences. Upon any such waiver of
a past default, such default shall cease to exist, and any default arising
therefrom shall be deemed to have been remedied for every purpose of this
Agreement. No such waiver shall extend to any subsequent or other default or
impair any right consequent thereon except to the extent expressly so waived.
Written notice of any such waiver shall be promptly given by the Trustee to the
Bond Insurer.
Section 9.05 Limitation. In the event that Back-up Servicer
is appointed Successor Servicer hereunder, it shall be entitled to the
following rights, remedies, and protections in carrying out its duties as
Servicer hereunder: (i) the Successor Servicer shall not be liable for any act
or omission in carrying out its duties hereunder except for its own negligence,
reckless disregard of its duties, bad faith or willful misconduct; (ii) the
Successor Servicer may rely on and be fully
-71-
78
protected in acting or refraining from acting in accordance with any
resolution, certificate, letter, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond or other documents received by
it which it has reason to believe is genuine and signed or presented to it by a
proper party; and (iii) the Successor Servicer shall not be responsible or
liable for the value or collectibility of any Lease Contract, except to the
extent resulting from the Successor Servicer's negligence, reckless disregard
of its duties, bad faith or willful misconduct.
ARTICLE X
THE TRUSTEE
Section 10.01 Duties of Trustee. (a) Trustee, prior to the
occurrence of a Servicer Default and after the curing or waiving of all
Servicer Defaults which may have occurred, undertakes to perform such duties
and only such duties as are specifically set forth in the Principal Agreements
to which it is a party. If a Servicer Default has occurred and shall be
continuing (the appointment of a Successor Servicer including Trustee being
deemed to constitute a cure of such Servicer Default), Trustee shall exercise
such of the rights and powers vested in it by this Agreement, and use the same
degree of care and skill in their exercise, as a prudent person would exercise
or use under the circumstances in the conduct of such person's own affairs.
(b) Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement.
(c) Subject to Section 10.01(a), no provision of this Agreement
shall be construed to relieve Trustee from liability for its own negligent
action, its own negligent failure to act or its own misconduct, provided:
(i) Trustee shall not be personally liable for an
error of judgment made in good faith by a Responsible Officer or
Responsible Officers of Trustee, selected by Trustee with due care,
unless it shall be proved that Trustee was negligent in ascertaining
the pertinent facts;
(ii) 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 Bond Insurer
relating to the time, method and place of conducting any proceeding
for any remedy available to Trustee, or exercising any trust or power
conferred upon Trustee, under this Agreement;
(iii) Trustee shall not be charged with knowledge of
any failure by Servicer to comply with the obligations of Servicer
referred to in clause (a) of Section 9.01 unless a Responsible Officer
of Trustee obtains actual knowledge of such failure, default or event
or
-72-
79
Trustee receives written notice of such failure, default or event from
Servicer, Bond Insurer or the Majority Certificateholders;
(iv) prior to the occurrence of any Servicer Default,
and after the curing or waiving of all such Servicer Defaults that may
have occurred, the duties and obligations of Trustee shall be
determined solely by the express provisions of the Principal
Agreements, Trustee shall not be liable except for the performance of
such duties and obligations as shall be specifically set forth in the
Principal Agreements, no implied covenants or obligations shall be
read into this Agreement against Trustee and, in the absence of bad
faith on the part of the Trustee, Trustee may conclusively rely on the
truth of the statements and the correctness of the opinions expressed
in any certificates or opinions furnished to Trustee and conforming to
the requirements of this Agreement; and
(v) without limiting the generality of this Section
10.01 or Section 10.02, Trustee shall have no duty (i) to see to any
recording, filing, or depositing of this Agreement, any agreement
referred to herein, or any financing statement or continuation
statement evidencing a security interest in the Lease Contracts or to
see to the maintenance of any such recording, filing or depositing or
to any rerecording, refiling or redepositing of any thereof, (ii) to
see to any insurance of the Equipment or to effect or maintain any
such insurance, (iii) to see to the payment or discharge of any tax,
assessment or other governmental charge or any Lien or encumbrance of
any kind owing with respect to, assessed or levied against, any part
of the Trust, (iv) to confirm or verify the contents of any reports or
certificates of Servicer delivered to the Trustee pursuant to this
Agreement believed by Trustee to be genuine and to have been signed or
presented by the proper party or parties, or (v) to inspect the
Equipment at any time or ascertain or inquire as to the performance or
observance of any of Seller's or Servicer's representations,
warranties or covenants or Servicer's duties and obligations as
Servicer.
(d) Trustee shall not be required to expend or risk its own funds
or otherwise incur financial liability in the performance of any of its duties
hereunder, or in exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Agreement shall in any event require
Trustee to perform, or be responsible for the manner of performance of, any of
the obligations of the Servicer or the Successor Servicer under this Agreement
except during such time, if any, as Trustee shall be the successor to, and be
vested with the rights, duties, powers and privileges of, Servicer in
accordance with the terms of this Agreement.
(e) Except for actions expressly authorized by this Agreement,
Trustee shall take no action reasonably likely to impair the interests of the
Trust or Bond Insurer in any Trust Asset now existing or hereafter created or
to impair the value of any Trust Asset now existing or hereafter created.
-73-
80
(f) Except as specifically provided herein, Trustee shall have no
power to vary the corpus of the Trust including, without limitation, the power
to (i) accept any substitute obligation for a Trust Asset initially contributed
to the Trust, (ii) add any other investment, obligation or security to the
Trust or (iii) withdraw from the Trust any Trust Assets, except for a
withdrawal permitted hereunder.
(g) In the event that the Paying Agent or the Transfer Agent and
Registrar shall not be Trustee and fail to perform any obligation, duty or
agreement in the manner or on the day required to be performed by the Paying
Agent or the Transfer Agent and Registrar, as the case may be, under this
Agreement, Trustee shall be obligated promptly to perform such obligation, duty
or agreement in the manner so required.
Section 10.02 Certain Matters Affecting the Trustee. Except as
otherwise provided in Section 10.01:
(a) Trustee may rely on and shall be protected in acting on, or in
refraining from acting in accordance with, any resolution, Officer's
Certificate, written notice from a Servicing Officer, certificate of auditors
or any other certificate, statement, instrument, opinion, report, notice,
request, consent, order, appraisal, bond or other paper or document believed by
it to be genuine and to have been signed or presented to it pursuant to this
Agreement by the proper party or parties;
(b) Trustee may consult with counsel, and any Opinion of Counsel
satisfactory to Bond Insurer 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 with such Opinion of Counsel;
(c) Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation hereunder or in relation hereto, at the request, order or
direction of the Certificateholders, pursuant to the provisions of this
Agreement, unless the Certificateholders shall have offered to Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby; nothing contained herein shall,
however, relieve Trustee of the obligations, upon the occurrence of any
Servicer Default which is continuing to exercise such of the rights and powers
vested in it by this Agreement, and to use the same degree of care and skill in
their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs;
(d) Trustee shall not be personally liable for any action taken,
suffered or omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this Agreement;
(e) Trustee shall not be bound to make any investigation into the
facts of matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order,
-74-
81
approval, bond or other paper or document, unless requested in writing so to do
by Bond Insurer or the Majority Certificateholders;
(f) Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian;
(g) except as expressly required under the Principal Agreements,
Trustee shall not be required to make any initial or periodic examination of
any documents or records related to the Trust Assets for the purpose of
establishing the presence or absence of defects, the compliance by Seller or
the Servicer with their representations and warranties or for any other
purpose; and
(h) whenever in the administration of the provisions of this
Agreement the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking, suffering or omitting any action to be
taken hereunder, such matter (unless other evidence in respect thereof be
herein specifically prescribed) may, in the absence of negligence or bad faith
on the part of Trustee, be deemed to be conclusively proved and established by
an Officer's Certificate or written notice of a Servicing Officer, and such
Officer's Certificate or written notice of a Servicing Officer, in the absence
of negligence or bad faith on the part of Trustee, shall be full warrant to
Trustee for any action taken, suffered or omitted by it under the provisions of
this Agreement upon the faith thereof.
Section 10.03 Trustee Not Liable for Recitals in Certificates.
Trustee assumes no responsibility for the correctness of the recitals contained
herein and in the Certificates (other than the certificate of authentication on
the Certificates). Except as set forth in Section 10.14, Trustee makes no
representations as to the validity or sufficiency of this Agreement or of the
Certificates (other than the certificate of authentication on the Certificates)
or of any Lease Contract or related document. Trustee shall not be accountable
for (i) the use or application by Seller of any of the Certificates or the use
or application by Seller of the proceeds of such Certificates, or for the use
or application of any funds paid to Seller in respect of the Trust Assets or
deposited in or withdrawn from the Investment Account, the Cash Collateral
Account or any Class A Certificate Account or (ii) any funds drawn under the
Letter of Credit, in each case by direction of Servicer and shall not be
responsible for filing any financing or continuation statements or certificates
of title relating to the Trust Assets under the UCC or other applicable law of
any applicable jurisdiction.
Section 10.04 Rockford to Pay Certain of Trustee's Fees and
Expenses. Rockford covenants and agrees to pay to Trustee from time to time,
and Trustee shall be entitled to receive, such fees and expenses as are set
forth in a letter agreement between Rockford and Trustee. The obligations of
Rockford under this Section 10.04 shall survive the termination of the Trust
and the resignation or removal of Trustee and the resignation or removal of
Rockford as Servicer.
Section 10.05 Eligibility Requirements for Trustee. There
shall at all times be a Trustee hereunder which shall be acceptable to Bond
Insurer and a national banking association organized and doing business under
the laws of the United States of America or of any State, authorized
-75-
82
under such laws to exercise corporate trust powers, having a combined capital
and surplus of at least $50,000,000 and subject to supervision or examination
by Federal or state authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section 10.05, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time Trustee shall cease to be
eligible in accordance with the provisions of this Section 10.05, it shall
resign immediately in the manner and with the effect hereunder specified in
this Article X.
Section 10.06 Resignation or Removal of Trustee. (a) Trustee
may at any time resign and be discharged from the trust hereby created by
giving written notice thereof to Seller, Servicer, Bond Insurer and the
Certificateholders. Upon receiving such notice of resignation, Seller shall
promptly appoint a successor trustee by written instrument, in duplicate, one
copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor trustee; provided, any such successor trustee must be
approved by Bond Insurer, which consent shall not be unreasonably withheld or
delayed. If no successor trustee shall have been so appointed and have
accepted within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee acceptable to Bond Insurer.
(b) If at any time Trustee shall cease to be eligible in
accordance with the provisions of Section 10.05 and shall fail to resign after
written request therefor by Seller with the consent of Bond Insurer or by Bond
Insurer, or if at any time Trustee shall be legally unable to act, or shall be
adjudged a bankrupt or insolvent, or a receiver of Trustee or of its property
shall be appointed, or any public officer take charge or control of Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation, then Seller may with the prior written consent of Bond Insurer and
shall at the direction of Bond Insurer, remove Trustee and promptly appoint a
successor trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to Trustee so removed and one copy to the
successor trustee at least 30 days in advance of the effective date of such
removal; provided, any such successor trustee must be approved by Bond Insurer.
In addition to the foregoing rights, and provided Seller first obtains the
written consent of the Bond Insurer (which may be given or withheld in the sole
and absolute discretion of the Bond Insurer), Seller may remove Trustee at any
time without cause and promptly appoint a successor trustee by written
instrument, in duplicate, one copy of which instrument shall be delivered to
Trustee so removed and one copy to the successor trustee; provided, any such
successor trustee must be approved by the Bond Insurer.
(c) Any resignation or removal of Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 10.06 shall
not become effective until acceptance of appointment by the successor trustee
acceptable to Bond Insurer as provided in Section 10.07 and any liability of
Trustee arising hereunder shall survive such appointment of a successor
trustee. Rockford shall promptly pay all fees and expenses owed to the
outgoing Trustee as well as all other amounts due Trustee hereunder.
-76-
83
Section 10.07 Successor Trustee. (a) Any successor trustee
appointed as provided in Section 10.06 shall execute, acknowledge and deliver
to Seller, and to its predecessor Trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor 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 Trustee herein. The predecessor Trustee shall
deliver to the successor Trustee all documents and statements held by it
hereunder, and Seller and the predecessor Trustee shall execute and deliver
such instruments and do such other things as may reasonably be required for
fully and certainly vesting and confirming in the successor trustee all such
rights, powers, duties and obligations, including, without limitation, the
execution of any documentation necessary to transfer the Letter of Credit to
the successor Trustee.
(b) No Person shall be appointed as successor trustee hereunder
unless at the time of such acceptance such successor trustee shall be eligible
under the provisions of Section 10.05.
(c) Upon acceptance of appointment by a successor trustee as
provided in this Section 10.07, such successor trustee shall mail notice of
such succession hereunder to Bond Insurer all the Certificateholders at their
respective addresses as shown in the Certificate Register.
Section 10.08 Merger or Consolidation of Trustee. Any Person
into which 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 Trustee shall be a party, or any Person succeeding to
the corporate trust business of Trustee, shall be the successor of Trustee
hereunder, provided such corporation shall be eligible under the provisions of
Section 10.05, 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 10.09 Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provisions of this Agreement, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of the Trust or Trust Assets may at the time be located, Trustee shall
have the power and may execute and deliver all instruments to appoint one or
more Persons to act as a co-trustee or co-trustees, or separate trustee or
separate trustees, of all or any part of the Trust, and to vest in such Person
or Persons, in such capacity and for the benefit of the Certificateholders and
Bond Insurer, such title to the Trust, or any part thereof, and, subject to the
other provisions of this Section 10.09, such powers, duties, obligations,
rights and trusts as Trustee may consider necessary or desirable. No co-
trustee or separate trustee hereunder shall be required to meet the terms of
eligibility as a successor trustee under Section 10.05 and no notice to
Certificateholders of the appointment of any co-trustee or separate trustee
shall be required under Section 10.07; provided, however, that each co-trustee
or separate trustee must be acceptable to Bond Insurer. The appointment of any
co-trustee or separate trustee shall not relieve the Trustee of any of its
obligations under the Principal Agreements.
-77-
84
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations
conferred or imposed upon Trustee shall be conferred or imposed upon
and exercised or performed by Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without Trustee joining
in such act), except to the extent that under any laws of any
jurisdiction in which any particular act or acts are to be performed
(whether as Trustee hereunder or as successor to the Servicer
hereunder), 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 Trust or any
portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at
the direction of Trustee;
(ii) no trustee hereunder shall be personally liable
by reason of any act or omission of any other trustee hereunder;
(iii) Trustee may at any time and shall at the
direction of Bond Insurer accept the resignation of or remove any
separate trustee or co-trustee; and
(iv) all duties owed hereunder to the Trustee shall be
deemed to be owed to each separate trustee and co-trustee.
(c) Any notice, request or other writing given to 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 or co-trustee shall refer to this Agreement and
the conditions of this Article X. 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
Trustee or separately, as may be provided therein, subject to all the
provisions of this Agreement, specifically including every provision of this
Agreement relating to the conduct of, affecting the liability of, or affording
protection to, Trustee. Every such instrument shall be filed with Trustee and
a copy thereof given to the Servicer.
(d) Any separate trustee or co-trustee may at any time constitute
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 to this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
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 Trustee, to the extent permitted by law, without the appointment of a new or
successor Trustee.
Section 10.10 Tax Returns. In the event the Trust shall be
required to file tax returns, Servicer, as soon as practicable after it is made
aware of such requirement, shall prepare or cause to be prepared any tax
returns required to be filed by the Trust and shall remit such returns to
Trustee
-78-
85
for signature at least five Business Days before such returns are due to be
filed. Servicer shall also prepare or shall cause to be prepared all tax
information required by law to be distributed to Certificateholders and shall
deliver such information to Trustee at least five Business Days prior to the
date it is required by law to be distributed to Certificateholders. Trustee,
upon written request, will furnish the Servicer with all such information known
to Trustee as may be reasonably required in connection with the preparation of
all tax returns of the Trust. In no event shall Trustee or Servicer be liable
for any liabilities, costs or expenses of the Trust or the Certificateholders
arising under any tax law, including without limitation, Federal, state or
local income or excise taxes or any other tax imposed on or measured by income
(or any interest or penalty with respect thereto or arising from a failure to
comply therewith).
Section 10.11 Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by Trustee without the possession
of any of the Certificates or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by Trustee shall be brought in its
own name as Trustee and shall be consented to, prior to institution, by Bond
Insurer. Any recovery of judgment shall, after provision for the payment of
the reasonable compensation and reasonable out-of-pocket expenses,
disbursements and advances of Trustee, its agents and counsel, be for the
ratable benefit of the Certificateholders and Bond Insurer in respect of which
such judgment has been obtained.
Section 10.12 Suits for Enforcement. If a Servicer Default
shall have occurred and be continuing, Trustee, subject to the provisions of
Section 10.01 and with the prior written consent of Bond Insurer, proceed to
protect and enforce its rights and the rights of the Certificateholders and
Bond Insurer under this Agreement by a suit, action or proceeding in equity or
at law or otherwise, whether for the specific performance of any covenant or
agreement contained in this Agreement or in aid of the execution of any power
granted in this Agreement or for the enforcement of any other legal, equitable
or other remedy as Trustee, being advised by counsel, shall deem most effectual
to protect and enforce any of the rights of Trustee or the Certificateholders.
Section 10.13 Rights of Bond Insurer to Direct Trustee. Bond
Insurer shall have the right to direct the time, method, and place of
conducting any proceeding for any remedy available to Trustee, or exercising
any trust or power conferred on Trustee; provided, subject to Section 10.01,
Trustee shall have the right to decline to follow any such direction if Trustee
being advised by counsel selected by it with due care determines that the
action so directed may not lawfully be taken, or if Trustee in good faith shall
determine that the proceedings so directed would be illegal or expose it to a
material risk of adverse personal liability; and provided further, nothing in
this Agreement shall impair the right of Trustee to take any action deemed
proper by Trustee and which is not inconsistent with such direction.
Section 10.14 Representations and Warranties of Trustee.
Trustee represents and warrants that:
-79-
86
(i) Trustee is a national banking association,
organized, existing and in good standing under the laws of the United
States of America;
(ii) Trustee has full power, authority and right to
execute, deliver and perform each of the Principal Agreements to which
it is a party, and has taken all necessary action to authorize the
execution, delivery and performance by it of each of the Principal
Agreements to which it is a party;
(iii) the execution, delivery and performance by
Trustee of the Principal Agreements (a) will not violate any provision
of any law or regulation governing the banking and trust powers of
Trustee or any order, writ, judgment, or decree of any court,
arbitrator or Governmental Authority applicable to Trustee or any of
its assets, (b) will not violate any provision of the corporate
charter or by-laws of Trustee, (c) will not violate any provision of,
or default under, or result in the creation or imposition of any Lien
on any properties included in the Trust Assets pursuant to the
provisions of any mortgage, indenture, contract, agreement or other
undertaking to which it is a party or which is binding upon it or upon
any of its assets except as permitted hereunder, and (d) will not
require any additional authorization, consent or approval or the
giving of any prior notice to, or the prior filing or registration
with, any Governmental Authority or agency regulating the activities
of Trustee or any successor Trustee;
(iv) there is no litigation pending or, to the best
knowledge of Trustee, threatened, before or by any court, public body
or board calling into question the creation, organization or existence
of Trustee, or the authority or ability of Trustee to accept the Trust
and perform its duties and obligations hereunder and under the other
Principal Agreements; and
(v) each of the Principal Agreements to which it is a
party have been duly executed and delivered by Trustee, and each
constitutes a legal, valid and binding obligation of Trustee
enforceable against Trustee in accordance with its terms.
Section 10.15 Maintenance of Office or Agency. Trustee will
maintain at its expense in Houston, Texas, an office or offices or agency or
agencies where notices and demands to or upon Trustee in respect to the
Certificates and this Agreement may be served. The Trustee initially appoints
the Corporate Trust Office as its office for such purposes. Trustee will give
prompt written notice to the Servicer, Bond Insurer and to each
Certificateholder of any change in the location of the Certificate Register or
any such office or agency.
Section 10.16. Servicer Default. Trustee shall promptly notify
each Rating Agency, Bond Insurer and Centre Square upon becoming aware that a
Servicer Default has occurred.
Section 10.17. Review of Lease Files. Within three Business
Days after Trustee receives the Lease Files for the Lease Contracts assigned to
the Trustee for the benefit of the
-80-
87
Certificateholders and Bond Insurer on a Closing Date, Trustee shall review the
Lease Files and shall deliver to the Certificateholders and Bond Insurer a
certificate in the form attached as Exhibit G whereby the Trustee confirms that
its review of the Lease Files for the Lease Contracts has been completed
without any exceptions other than those noted therein. Within six months after
the end of the Funding Period, Trustee shall review the Lease Files and shall
deliver to the Certificateholders and Bond Insurer certification that it has
reviewed the Lease Files with respect to Lease Contracts relating to Vehicles
and that all original Certificates of Title have been delivered to Trustee.
Within 90 days of the Initial Closing Date, Trustee shall certify to Bond
Insurer that an amended certificate of acceptance in the form of Exhibit E to
the Equipment and Lease Purchase Agreement in connection with Lease Contracts
originated on the form attached as Exhibit D-1 to the Equipment and Lease
Purchase Agreement is in the related Lease Files.
ARTICLE XI
TERMINATION
Section 11.01 Termination of Trust. (a) The respective
obligations and responsibilities of Seller, Servicer and Trustee created hereby
(other than the obligation of Trustee to make payments to the
Certificateholders as hereafter set forth and other than liability for any
breach by any such party prior to the date of such termination of any of its
obligations, representations or warranties under this Agreement) shall
terminate, except with respect to the duties described in Sections 3.07(c),
8.02 and 11.03(b), upon the Trust Termination Date.
(b) If on the Trust Termination Date there are any unpaid amounts
due with respect to the Certificates, Trustee shall, at the written direction
of Bond Insurer, sell, dispose of or otherwise liquidate an amount of the Trust
Assets remaining in the Trust, sufficient to pay any such unpaid amounts, in a
commercially reasonable manner and on commercially reasonable terms. The
proceeds of such sale, disposition or liquidation shall be treated as
Collections, deposited into the appropriate accounts, and distributed in
accordance with Section 4.08(b). Trustee will rely upon the advice and
instructions of Bond Insurer with respect to the manner and terms of any such
sale.
Section 11.02 Optional Purchase. Seller will have the option
(and, if the Seller elects not to exercise such option, Bond Insurer will have
the option) but not the obligation, on or after the earlier to occur of the
Payment Date as of which the Aggregate Discounted Lease Contract Balance
(adjusted, however, to include the present value of any Scheduled Payments for
which Servicer Advances have been made that Servicer in good faith believes it
will be able to recoup from subsequent Collections under the applicable Lease
Contracts) has declined to 10% or less of the Initial Aggregate Certificate
Principal Balance, to purchase all, but not less than all, of Trustee's right,
title and interest in the Equipment and the Lease Contracts at a price equal to
(a) the Class A Certificate Investor Interest plus (b) accrued interest on the
Class A Certificates for one month, plus (c) any Servicing Fees due plus (d)
all amounts due to Bond Insurer hereunder and under the Insurance Agreement
(the "Optional Purchase Amount"). The Optional Purchase Amount will be paid in
immediately available funds on the Business Day preceding a Payment Date into
the
-81-
88
Investment Account and will be distributed by Trustee to the
Certificateholders, the Servicer and Bond Insurer.
Section 11.03 Final Distribution. (a) Written notice of any
termination, specifying the Payment Date upon which the Certificateholders
shall surrender their Certificates for payment of the final distribution and
cancellation, shall be given (subject to at least two Business Days' prior
notice from Servicer to Trustee and Bond Insurer) by Trustee to the
Certificateholders, mailed not later than the fifth Business Day of the month
that includes such final Payment Date specifying (i) the Payment Date upon
which final payment of the Certificates will be made upon presentation and
surrender of Certificates at the office or offices of the Paying Agent therein
designated, (ii) the amount of any such final payment, (iii) that the Record
Date otherwise applicable to such Payment Date is not applicable, payments
being made only upon presentation and surrender of the Certificates at the
office or offices therein specified and (iv) that the Certificates shall cease
to bear interest on such final Payment Date. Servicer's notice to Trustee and
Bond Insurer in accordance with the preceding sentence shall be accompanied by
an Officer's Certificate setting forth the information specified in Section
3.09 covering the period during the then current calendar year through the date
of such notice. Trustee shall give such notice to the Transfer Agent and
Registrar and the Paying Agent at the time such notice is given to the
Certificateholders.
(b) Notwithstanding the termination of the Trust, all Collections
in respect of Trust Assets held by Servicer and all funds then on deposit in
the Accounts, up to an amount at least equal to the outstanding Class A
Certificate Investor Interest and the unpaid interest thereon, up to the final
Payment Date, at the Certificate Rate, shall continue to be held in trust for
the benefit of the Certificateholders and the Paying Agent or Trustee shall pay
such funds in the manner provided in Section 4.08(b). In the event that all of
the Certificateholders shall not surrender their Certificates for cancellation
within 30 days after the date specified in the above-mentioned written notice,
Trustee shall give a second written notice to the remaining Certificateholders
to surrender their Certificates for cancellation and receive the final
distribution with respect thereto. If within 30 days after the second notice
all the Certificateholders shall not have surrendered their Certificates for
cancellation, Trustee shall distribute to Seller all funds then on deposit in
such accounts, all liability of Trustee and Bond Insurer with respect to such
funds shall thereafter cease and the remaining Certificateholders shall
thereafter look only to Seller for the payment of any sums to which they may be
entitled in respect of their Certificates. Trustee may take appropriate steps,
or may appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid by the Servicer.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01 Amendment. (a) This Agreement may be amended
from time to time by written agreement executed by each of Servicer, Back-up
Servicer, Seller and Trustee, with the consent of Bond Insurer but without the
consent of any of the Certificateholders, to cure any
-82-
89
ambiguity or to correct or supplement any provisions herein which may be
inconsistent with any other provisions herein; provided, such action shall not,
as evidenced by an Opinion of Counsel delivered by Servicer to Trustee and Bond
Insurer, adversely affect in any material respect the interests of the
Certificateholders and such Opinion of Counsel shall further state that the
execution of such amendment is authorized or permitted by this Agreement.
Trustee may, subject to the provisions in the immediately preceding sentence,
but shall not be obligated to, enter into any such amendment which affects
Trustee's rights, duties or immunities under this Agreement or otherwise.
(b) This Agreement may also be amended from time to time by
written agreement executed by each of Servicer, Back-up Servicer, Seller and
Trustee with the consent of Bond Insurer and the Majority Certificateholders,
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or modifying in any manner
the rights of the Certificateholders; provided, no such amendment shall (i)
reduce in any manner the amount of, or delay the timing of, distributions which
are required to be made on any Certificate without the consent of such
Certificateholder, (ii) change the definition of or the manner of calculating
the Class A Certificate Investor Interest or Class A Certificate Distributable
Amount without the consent of each affected Certificateholder, (iii) reduce the
aforesaid percentage required to consent to any such amendment, without the
consent of each Certificateholder or (iv) change the definition of Requisite
LOC Amount, Minimum LOC Amount, Available Amount, or Majority
Certificateholders without the consent of each Certificateholder. Servicer
shall deliver to Trustee and Bond Insurer, upon execution and delivery of any
amendment pursuant to this clause (b), an Opinion of Counsel stating that the
execution of such amendment is authorized or permitted by this Agreement.
Trustee may, but shall not be obligated to, enter into any such amendment which
affects Trustee's rights, duties or immunities under this Agreement or
otherwise.
(c) Not less than five days prior to the execution of any
amendment to this Agreement under Section 12.01(b), Trustee shall furnish
written notice of such amendment including a copy of the text of the proposed
amendment to Bond Insurer and each Certificateholder. Promptly after the
execution of any other amendment or consent Trustee shall furnish written
notification of the substance of such amendment to Bond Insurer, each Rating
Agency and each Certificateholder.
(d) It shall not be necessary for the consent of
Certificateholders under this Section 12.01 to approve the particular form of
any proposed amendment, but it shall be sufficient if such Certificateholders
shall approve the substance thereof. The manner of obtaining such consents and
of evidencing the authorization of the execution thereof by Certificateholders
shall be subject to such reasonable requirements as Trustee may prescribe.
Section 12.02 Protection of Right, Title and Interest to Trust
Assets. (a) Servicer shall cause this Agreement, all amendments hereto and/or
all financing statements and continuation statements and any other necessary
documents covering the Bond Insurer's, Certificateholder's and Trustee's right,
title and interest to the Trust Assets and its security interest in the
Equipment and other Trust Assets to be promptly recorded, registered and filed,
and at all times to be kept recorded, registered and filed, all in such manner
and in such places as may be required by law fully
-83-
90
to preserve and protect the right, title and interest of Trustee hereunder to
all property comprising the Trust Assets and its security interest in the
Equipment and other Trust Assets, all as provided in, and subject to, Section
2.01(g). Servicer shall deliver to Trustee a financing statement recording
chart containing the filing information with respect to any documents recorded,
registered or filed as provided above, as soon as available following such
recording, registration or filing. Seller and Servicer shall cooperate fully
in connection with the obligations set forth above and will execute any and all
documents reasonably required to fulfill the intent of this Section 12.02(a).
(b) Servicer will give Bond Insurer and Trustee prompt written
notice of any relocation of any office from which it services Trust Assets or
keeps records concerning the Trust Assets or of its principal executive office
and whether, as a result of such relocation, the applicable provisions of the
relevant UCC would require the filing of any amendment of any previously filed
financing or continuation statement or of any new financing statement and shall
file such financing statements or amendments as may be necessary to continue
the perfection of the Trustee's security interest in the Trust Assets, the
Equipment and the proceeds thereof. Servicer will at all times maintain each
office from which it services Trust Assets and its principal executive office
within the United States of America.
Section 12.03 Limitation on Rights of Certificateholders. (a)
The death, incapacity or dissolution of any Certificateholder shall not operate
to terminate this Agreement or the Trust, nor shall such death, incapacity or
dissolution entitle such Certificateholder's legal representatives, heirs,
successors or assigns to claim an accounting or to take any action or commence
any proceeding in any court for a partition or winding up of the Trust, nor
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.
(b) No Certificateholder shall have any right to vote (except with
respect to the matters specifically provided herein) or in any manner otherwise
control the operation and management of the Trust, or the obligations of the
parties hereto, nor shall anything herein set forth, or contained in the terms
of the Certificates be construed so as to constitute the Certificateholders
from time to time as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by reason of any
action taken by any of the parties to this Agreement pursuant to any provision
hereof.
(c) No Certificateholder shall have any right by virtue of any
provisions of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless Bond
Insurer has given its prior written consent, such Certificateholder previously
shall have given to Trustee written notice of any default hereunder, and unless
the Majority Certificateholders shall have made written request upon Trustee to
institute such actions, suit or proceeding in its own name as Trustee hereunder
and shall have offered to Trustee such reasonable indemnity as it may require
against the costs, expenses and liabilities to be incurred therein or thereby,
and Trustee, for 60 days after its receipt of such notice, request and offer of
indemnity, shall have neglected or refused to institute any such action, suit
or proceeding; it being understood and intended, and being expressly covenanted
by each Certificateholder with
-84-
91
every other Certificateholder and Trustee, that no one or more
Certificateholder shall have the right in any manner whatever by virtue or by
availing itself or themselves of any provisions of this Agreement to affect,
disturb or prejudice the rights of the Certificateholders of any other of the
Certificates, or to obtain or seek to obtain priority over or preference to any
other such Certificateholder (except as expressly provided in Section 4.08(b)),
or to enforce any right under this Agreement, except in the manner herein
provided. For the protection and enforcement of the provisions of this Section
12.03, each and every Certificateholder and the Trustee shall be entitled to
such relief as can be given either at law or in equity.
Section 12.04 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York, without
reference to its conflict of law provisions, and the obligations, rights and
remedies of the parties hereunder shall be determined in accordance with such
laws.
Section 12.05 Notices. All demands, notices, and
communications under this Agreement shall be in writing and shall be deemed to
have been duly given, made and received (i) one (1) Business Day after it is
delivered against receipt of registered or certified mail or upon actual
receipt of registered or certified mail, postage prepaid, return receipt
requested; (ii) when delivered by courier with appropriate evidence of receipt;
or (iii) one (1) Business Day after it is transmitted via facsimile
transmission with appropriate evidence of receipt at the following address of
the recipient: (a) in the case of Seller, at 000 Xxxxxxxx Xxxxx Xxxx, Xxxxx
000, Xxxxxxxx Xxxxx, Xxx Xxxx 00000, (b) in the case of Servicer, at 0000 Xxxx
Xxxxx Xxxxxx, Xxxxx 000, Xxxxx Xxx, Xxxxxxxxxx 00000, (c) in the case of
Trustee, at the Corporate Trust Office, (d) in the case of Back-up Servicer, at
the Corporate Trust Office, (e) in the case of Xxxxx'x, at 00 Xxxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, Attention: ABS Surveillance Group, (f) in the case of
Standard & Poor's, at 00 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx, Xxxxxxxxx: Asset Backed
Surveillance Group, and (g) in the case of Bond Insurer, at 000 Xxxx Xxxxxx,
Xxxxxx, Xxx Xxxx 00000 (fax number (000) 000-0000, Attention: Insured Portfolio
Management-Structured Finance (IPM-SF). Any party may alter the address to
which communications are to be sent by giving notice of such change of address
in conformity with the provisions of this Section 12.05 for giving notice and
by otherwise complying with any applicable terms of this Agreement.
Section 12.06 Severability of Provisions. If any one or more
of the covenants, agreements, provisions or terms of this Agreement shall for
any reason whatsoever be 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 or of
the Certificates or rights of the Certificateholders thereof.
Section 12.07 Assignment. This Agreement may not be assigned
by Servicer, Trustee, Back-up Servicer or Seller without the prior consent of
the Bond Insurer.
-85-
92
Section 12.08 Certificates Nonassessable and Fully Paid. It is
the intention of Seller and the Certificateholders that the Certificateholders
shall not be personally liable for obligations of the Trust, that the interests
represented by the Certificates shall be nonassessable for any losses or
expenses of the Trust or for any reason whatsoever, and that Certificates upon
authentication thereof by Trustee pursuant to Section 6.02 are and shall be
deemed fully paid.
Section 12.09 Further Assurances. Seller and Servicer agree to
do and perform from time to time, any and all acts and to execute any and all
further instruments required or reasonably requested by Bond Insurer or Trustee
more fully to effect the purposes of this Agreement in a manner consistent with
this Agreement, including, without limitation, the execution of any financing
statements or continuation statements or other documents or instruments
relating to the Trust Assets for filing under the provisions of the UCC or
other relevant laws of any applicable jurisdiction.
Section 12.10 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of Trustee, Bond Insurer or
the Certificateholders, 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 thereof 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 privileges
provided by law.
Section 12.11 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 together shall constitute
one and the same instrument.
Section 12.12 Third-Party Beneficiary. The Bond Insurer is an
express third party beneficiary of this Agreement and is entitled to enforce
this Agreement as if it were a party hereto.
Section 12.13 Actions by Certificateholders.
(a) Wherever in this Agreement a provision is made that an action
may be taken or a notice, demand or instruction given by Certificateholders,
such action, notice or instruction may be taken or given by any
Certificateholder, unless such provision requires a specific percentage of
Certificateholders.
(b) Any request, demand, authorization, direction, notice,
consent, waiver or other act by a Certificateholder shall be evidenced in such
manner as is satisfactory to Trustee and shall bind such Certificateholder and
every subsequent holder of such Certificate issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done or omitted to be done by Trustee or Servicer in reliance thereon,
whether or not notation of such action is made upon such Certificate.
-86-
93
Section 12.14 Intention of Parties. For purposes of Federal,
state and local income and franchise taxes and any other tax imposed on or
measured by income, the parties to this Agreement and the Certificateholders,
by acceptance of the Certificates, intend that the Certificates will be treated
as indebtedness, and except to the extent otherwise required by law, (i) each
Certificateholder, by acceptance of its Certificate, agrees to treat the
interests evidenced by the Certificates as indebtedness, and further agrees
that any Certificateholder acquiring an interest in a Certificate through it
may do so only subject to an obligation to comply with this Agreement as to the
treatment of such Certificate as indebtedness for tax purposes, and (ii) the
Seller agrees to treat the transactions contemplated by this Agreement as a
financing, and to include in the computation of its Federal, state and local
income and franchise taxes and any other tax imposed on or measured by income,
all items of income, gain, loss, deduction and credit attributable to the
ownership of the Lease Contracts, subject to the indebtedness represented by
the Certificates.
Section 12.15 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 other prior
understandings, written or oral, are superseded by this Agreement. This
Agreement may not be modified, amended, waived or supplemented except as
provided herein.
Section 12.16 Headings. The headings herein are for purposes
of reference only and shall not otherwise affect the meaning or interpretation
of any provision hereof.
Section 12.17 Certificates and Opinions of Counsel. (a) Any
certificate delivered hereunder may be based, insofar as it relates to legal
matters, upon an Opinion of Counsel, unless the Person delivering such
certificate knows, or in the exercise of reasonable care should know, that such
opinion with respect to the matters upon which such certificate may be based as
aforesaid is erroneous. Any Opinion of Counsel or certificate delivered
hereunder may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of
Servicer, or Seller, as the case may be, stating that the information with
respect to such factual matters is in the possession of the Servicer or Seller,
as the case may be, unless such counsel or the Person delivering such
certificate knows, or in the exercise of reasonable care should know, that such
certificate, opinion or representations with respect to such matters are
erroneous. Any Opinion of Counsel delivered hereunder may contain exceptions
and qualifications satisfactory to Trustee and Bond Insurer.
(b) Any Opinion of Counsel or certificate delivered hereunder may
be based, insofar as it relates to accounting matters, upon a certificate or
opinion of or representations by Independent Public Accountants, unless such
counsel or the Person delivering such certificate, as the case may be, knows
that the certificate or opinions or representations with respect to the
accounting matters upon which the certificate or opinion may be based as
aforesaid are erroneous, or in the exercise of reasonable care should know that
the same are erroneous.
-87-
94
(c) Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments hereunder, they may, but need not, be consolidated and form
one instrument.
Section 12.18 Bond Insurer Default. If a Bond Insurer Default
occurs and is continuing, the Bond Insurer's right to consent hereunder and to
direct the Trustee shall be suspended until remedied and, during such
suspension, in all provisions of this Agreement where the Bond Insurer's
consent or direction is required or permitted, the consent or direction of the
Majority Certificateholders shall be required or permitted unless the terms of
this Agreement require the consent or direction of a larger number of Holders.
Section 12.19 Non-Petition. Each party hereto agrees that so long
as this Agreement is in effect and for one year and one day after its
termination, neither it nor any Affiliate thereof will file any involuntary
petition or otherwise institute any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding or other proceeding under any federal or
state bankruptcy or similar law against Seller.
-88-
95
IN WITNESS WHEREOF, Seller, Servicer, Back-up Servicer and Trustee
have caused this Pooling and Servicing Agreement to be duly executed by their
respective officers as of the day and year first above written.
ROCKFORD LEASE FUNDING CORP.
as Seller
By: __________________________________
Name:
Title:
ROCKFORD INDUSTRIES, INC.
as Servicer
By: __________________________________
Name:
Title:
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
as Trustee and Back-up Servicer and as
the Initial Registrar and Transfer Agent
and Paying Agent
By: __________________________________
Name:
Title:
-89-
