-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U32aTIgpCW9xxZom8yEY7dQucA/OygP6FTKBGFRiOFAyNJblizJHC8YENFIDsp9m LaJS5PrjBt7reQbcZPakig== 0001017062-98-002278.txt : 19981116 0001017062-98-002278.hdr.sgml : 19981116 ACCESSION NUMBER: 0001017062-98-002278 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROCKFORD INDUSTRIES INC CENTRAL INDEX KEY: 0000945901 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE LESSORS [6172] IRS NUMBER: 330075112 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26324 FILM NUMBER: 98748964 BUSINESS ADDRESS: STREET 1: 1851 EAST FIRST ST STREET 2: STE 600 CITY: SANTA ANA STATE: CA ZIP: 92705 BUSINESS PHONE: 7145477166 MAIL ADDRESS: STREET 1: 1851 E FIRST ST STE 600 CITY: SANTA ANA STATE: CA ZIP: 92705 10-Q 1 ROCKFORD INDUSTRIES - FORM 10-Q - 9/30/1998 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ---------------- FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 0-26324 ---------------- ROCKFORD INDUSTRIES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ---------------- CALIFORNIA 33-0075112 (STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.) 1851 E. FIRST ST. SANTA ANA, CA 92705 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (714) 547-7166 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) ---------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] The number of shares outstanding of the registrant's no par value Common Stock at November 3, 1998 was 4,108,785 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- ROCKFORD INDUSTRIES, INC. INDEX
PAGE NUMBER ------ PART I. FINANCIAL INFORMATION: ITEM 1. FINANCIAL STATEMENTS: Consolidated Balance Sheets--September 30, 1998 (unaudited) and December 31, 1997.................................................... 1 Consolidated Statements of Income--Three months and Nine months ended September 30, 1998 and 1997 (unaudited).............................. 2 Consolidated Statements of Cash Flows--Nine months ended September 30, 1998 and 1997 (unaudited)............................................ 3 Notes to Consolidated Financial Statements............................ 4 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................................. 5-8 PART II. OTHER INFORMATION.............................................. 9 SIGNATURES.............................. ............................... 10
ROCKFORD INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31, 1998 1997 ------------- ------------ (UNAUDITED) (IN THOUSANDS EXCEPT NUMBER OF SHARES AND PER SHARE DATA) ASSETS ------ Cash and cash equivalents........................... $ 3,188 $ 1,077 Restricted cash and cash equivalents................ 20,254 15,590 Accounts receivable (net of allowance for doubtful accounts of $123 at September 30, 1998 and $610 at December 31, 1997)................................. 22,693 14,532 Prepaid expenses.................................... 2,029 1,767 Income taxes receivable............................. 2,606 2,606 Net investment in direct finance leases (net of lease receivable and residual valuation allowance of $1,442 at September 30, 1998 and $1,445 at December 31, 1997)................................. 22,449 24,346 Net fixed assets.................................... 3,480 3,264 Discounted lease rentals assigned to lenders........ 40,135 61,885 -------- -------- $116,834 $125,067 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Liabilities: Lines of credit..................................... $ 12,035 $ 15,862 Accounts payable.................................... 22,599 8,566 Accrued expenses and other liabilities.............. 4,019 1,888 Estimated recourse obligations...................... 5,291 2,123 Deferred income taxes............................... 5,720 5,720 Nonrecourse debt.................................... 43,691 69,017 -------- -------- Total liabilities................................. 93,355 103,176 -------- -------- Commitments and contingencies Stockholders' equity: Series A redeemable preferred stock............... 1,575 1,575 Common stock no par value; 10,000,000 shares au- thorized; 4,108,785 and 4,107,117 shares out- standing......................................... 14,057 14,045 Retained earnings................................. 7,847 6,271 -------- -------- Total stockholders' equity...................... 23,479 21,891 -------- -------- $116,834 $125,067 ======== ========
See notes to financial statements 1 ROCKFORD INDUSTRIES INC. CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ------------------- ------------------- 1998 1997 1998 1997 --------- --------- --------- --------- (IN THOUSANDS EXCEPT SHARES OUTSTANDING AND PER SHARE DATA) REVENUES: Gain on sale of financing transac- tions.............................. $ 3,707 $ 3,247 $ 9,654 $ 7,803 Finance income...................... 879 920 2,782 3,047 Servicing related revenue........... 486 747 1,437 2,439 Other income........................ 843 488 1,899 1,223 --------- --------- --------- --------- Total revenues.................... 5,915 5,402 15,772 14,512 --------- --------- --------- --------- COSTS: Operating expenses.................. 3,988 2,661 10,793 7,207 Provision for losses................ 461 921 942 1,872 Interest expense.................... 295 423 1,281 1,568 --------- --------- --------- --------- Total costs....................... 4,744 4,005 13,016 10,647 --------- --------- --------- --------- Income before income taxes............ 1,171 1,397 2,756 3,865 Income taxes.......................... 457 513 1,077 1,500 --------- --------- --------- --------- Net income............................ $ 714 $ 884 $ 1,679 $ 2,365 ========= ========= ========= ========= Net income applicable to Common stock- holders.............................. $ 680 $ 849 $ 1,577 $ 2,275 ========= ========= ========= ========= Net income per share: Basic............................... 0.17 0.21 0.38 0.55 Diluted............................. 0.16 0.20 0.38 0.53 Weighted average shares outstanding: Basic............................... 4,108,785 4,105,517 4,107,951 4,105,517 Diluted............................. 4,501,323 4,458,400 4,471,338 4,422,233
See notes to financial statements 2 ROCKFORD INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, -------------------- 1998 1997 --------- --------- (IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)...................................... $ 1,681 $ 2,365 Adjustments to reconcile net income to net cash pro- vided by operating activities: Depreciation and amortization........................ 1,464 420 Provision for losses................................. 942 (390) Estimated recourse obligations....................... 3,168 1,868 (Gain) loss on sale of residuals..................... 35 (324) Gain on sale of financing transactions excluding est. recourse obligations................................ (12,822) (6,904) Initial direct cost amortization..................... 602 941 Net amortization of deferred interest................ (3,130) (2,420) Changes in assets and liabilities: Restricted cash...................................... (4,240) (7,782) Accounts receivable and prepaid expenses............. (9,102) 1,164 Income taxes receivable.............................. -- 665 Accounts payable and accrued liabilities............. 14,668 (545) Income taxes payable................................. 1,075 -- Deferred income taxes................................ -- 1,139 --------- --------- Net cash used in operating activities.............. (5,659) (9,803) CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds sales and assignments of leases and payments received from lessees................................. 185,545 144,090 Proceeds from sale of residuals........................ 4,767 1,265 Purchase of fixed assets............................... (802) (985) Initial direct cost capitalization..................... (9,194) (7,450) Equipment purchased for financing...................... (168,649) (122,213) --------- --------- Net cash provided by (used in) investing activi- ties.............................................. 11,667 14,707 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from line of credit........................... 173,322 79,069 Preferred stock dividends.............................. (70) (90) Payments on line of credit............................. (177,149) (87,123) --------- --------- Net cash provided by financing activities.......... (3,897) (8,144) --------- --------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS..... 2,111 (3,240) CASH AND CASH EQUIVALENTS, beginning of year............. 1,077 3,985 --------- --------- CASH AND CASH EQUIVALENTS, end of period................. $ 3,188 $ 745 ========= ========= SUPPLEMENTAL DISCLOSURES: Income taxes paid...................................... $ -- $ -- ========= ========= Interest paid.......................................... $ 1,281 $ 607 ========= ========= SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES-- Estimated lessee payments made directly to nonrecourse lending institutions.................................. $ 41,604 $ 39,405 ========= =========
See notes to financial statements 3 ROCKFORD INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1--BASIS OF PRESENTATION The accompanying consolidated financial statements, including the accounts of Rockford Industries, Inc. and its wholly-owned subsidiaries (the "Company), have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles ("GAAP") for complete financial statements. The financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K filed with the SEC on March 31, 1998. In the opinion of management, the consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair statement of the balance sheets as of September 30, 1998 and December 31, 1997, the statements of income for the three month and nine month periods ended September 30, 1998 and 1997, and the statements of cash flows for the nine month periods ended September 30, 1998 and 1997. The results of operations for the three month and nine month periods ended September 30, 1998 are not necessarily indicative of the results of operations to be expected for the entire fiscal year ending December 31, 1998. NOTE 2--NEW ACCOUNTING PRONOUNCEMENTs In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS No. 128"). Under SFAS No. 128, the Company is required to disclose basic earnings per share ("EPS") and diluted EPS for all periods for which income is presented. SFAS No. 128 requires adoption for fiscal periods ending after December 15, 1997. The Company has adopted the provisions of SFAS No. 128 beginning with the 1997 year-end consolidated financial statements. EPS for the three month and nine month periods ending September 30, 1997 have been restated to conform with SFAS No. 128. In June 1997, FASB issued SFAS No. 130. Reporting Comprehensive Income, which is effective for annual and interim periods beginning after December 15, 1997. This statement requires all items to be recognized under accounting standards as comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. The Company has adopted SFAS No. 130 beginning March 31, 1998. Comprehensive income for the three month and nine month periods ending September 30, 1998 was $680,000 and $1,577,,000 respectively. Comprehensive income differs from net income by $34,000 and $102,000 for the respective three month and nine month periods ending September 30, 1998. This difference is attributable to preferred stock dividends. In June 1997, FASB issued SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, which is effective for annual and interim periods beginning after December 15, 1997. This statement establishes standards for the method that public entities report information about operating segments in annual financial statements and requires enterprises report selected information about operating segments in interim financial reports issued to shareholders. It also establishes standards for related disclosures about product and services, geographical areas and major customers. The adoption of this standard does not have a material effect on the Company's financial reporting. In June 1998, FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, which is effective for annual periods beginning after June 15, 1999. This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. The adoption of this standard is not expected to have a material effect on the Company's financial condition, results of operations or cash flows. 4 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS--THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 FINANCE CONTRACT ORIGINATIONS AND REVENUES. Finance contract originations increased by approximately $19.1 million or 48% to $59.0 million in the quarter ended September 30, 1998 from $39.9 million in the quarter ended September 30, 1997 reflecting the benefits of an expanded sales force. Total revenues for the quarter ended September 30, 1998 were $5.9 million as compared to $5.4 million for the quarter ended September 30, 1997. This increase is primarily due from increased finance contract originations and gains derived from securitizations and non recourse sales. During the quarter, the Company sold approximately $60.7 million of finance contracts for a gain of $3.7 million compared to $37.0 million of finance contract sales and a gain of $2.3 million in the same quarter in 1997. The gain of $2.3 million in the third quarter in 1997 excludes a one time gain of $898,000 attributed to the amended securitization agreement with SunAmerica dated August 28, 1997. Gain margins decreased to 6.1% compared to 6.3% for the same period a year ago. The decline in gain margin is primarily a result of increasing the gain on sale loss reserve assumption from 1.5% in 1997 to 2.5% in 1998, partially offset by a lower cost of funds. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses in the third quarter of 1998 were $4.0 million as compared to $2.7 million in the third quarter of 1997, representing an increase of $1.3 million or 48%. This increase was primarily due to expenses related to the Company's expanded sales and marketing group and additional investment in the infrastructure necessary to service and support an increasing level of finance contract originations and the increased size of the securitized portfolio. PROVISION FOR LOSSES. Provision for losses for the quarter ending September 30, 1998 were $461,000 as compared to $921,000 for the same period a year ago, representing a decrease of $460,000 or 50%. The Company records provision for losses on transactions in which the past due receivable is greater than 120 days. Provision for losses on securitized transactions sold subsequent to January 1, 1997 are netted against finance gains per SFAS No. 125. The Company believes its estimates of reserves at September 30, 1998 are adequate based upon historical data and industry standards. INTEREST EXPENSE. Interest expense decreased to $295,000 for the quarter ending September 30, 1998 from $423,000 for the quarter ending September 30, 1997. This decrease is primarily due to principal amortization of non recourse debt, which decreased from $70 million at September 30, 1997 to $40 million at June 30, 1998. NET INCOME. Income before taxes was $1,171,000 for the quarter ended September 30, 1998 as compared to $1,397,000 for the same quarter of the prior year. The effective income tax rate remained consistent for the comparative periods shown. Net income was $714,000 for the quarter ended September 30, 1998 as compared to $884,000 for the same quarter of the prior year, representing a decrease of $170,000 or 19%. Basic net income of $.17 per share on weighted average shares outstanding of 4,109,000 was earned during the third quarter of 1998, as compared to basic net income of $.21 per share on weighted average shares outstanding of 4,106,000 for the third quarter of 1997. Diluted net income of $.16 per share on weighted average shares outstanding of 4,501,000 was earned for the third quarter of 1998, as compared to diluted net income of $.20 per share on weighted average shares outstanding of 4,458,000 for the third quarter of 1997. RESULTS OF OPERATIONS--NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 FINANCE CONTRACT ORIGINATIONS AND REVENUES. Finance contract originations increased by approximately $45.6 million or 37% to $167.8 million for the nine months ended September 30, 1998 from $122.2 million for the nine months ended September 30, 1997, reflecting the benefits of an expanded sales force. Total revenues for the nine months ended September 30, 1998 were $15.8 million as compared to $14.6 million for the nine months ended September 30, 1997. This increase is primarily due from increased finance contract originations and gains 5 derived from securitizations and non recourse sales. During the nine month period, the Company sold approximately $159.7 million of finance contracts for a gain of $9.7 million compared to $113.9 million of finance contract sales and a gain of $6.9 million for the same period in 1997. 1997 gain excludes a one time gain of $898,000 attributed to the amended securitization agreement with SunAmerica dated August 28, 1997. Gain margins decreased to 6.0% compared to 6.1% for the same period a year ago due to increasing gain on sale loss reserve assumption from 1.5% in 1997 to 2.5% in 1998, partially offset by a lower cost of funds. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses for the nine months ended September 30, 1998 were $10.8 million as compared to $7.2 million for the same period a year ago, representing a increase of $3.6 million or 50%. This increase was primarily due to expenses related to the Company's expanded sales and marketing group and additional investment in the infrastructure necessary to service and support an increasing level of finance contract originations and the increased size of the securitized portfolio. PROVISION FOR LOSSES. Provision for losses for the nine months ending September 30, 1998 were $942,000 as compared to $1,872,000 for the same period a year ago, representing a decrease of $930,000 or 50%. The Company records provision for losses on transactions in which the past due receivable is greater than 120 days. Provision for losses on securitized transactions sold subsequent to January 1, 1997 are netted against finance gains per SFAS No. 125. The Company believes it estimates of reserves at September 30, 1998 are adequate based upon historical data and industry standards. INTEREST EXPENSE. Interest expense decreased to $1,281,000 for the nine months ending September 30, 1998 from $1,568,000 for the nine months ending September 30, 1997. This decrease is primarily due to principal amortization of non recourse debt. NET INCOME. Income before taxes was $2,756,000 for the nine months ended September 30, 1998 as compared to $3,865,000 for the same period of the prior year. The effective income tax rate remained consistent for the comparative periods shown. Net income was $1,679,000 for the nine months ended September 30, 1998 as compared to $2,365,000 for the same period of the prior year, representing a decrease of $686,000 or 29%. Basic net income of $.38 per share on weighted average shares outstanding of 4,108,000 was earned during the nine months ending September 30, 1998, as compared to basic net income of $.55 per share on weighted average shares outstanding of 4,106,000 for the nine months ending September 30, 1997. Diluted net income of $.38 per share on weighted average shares outstanding of 4,471,000 was earned for the nine months ending September 30, 1998, as compared to diluted net income of $.53 per share on weighted average shares outstanding of 4,422,000 for the same period of 1997. LIQUIDITY AND CAPITAL RESOURCES Because equipment financing is a capital intensive business, the Company requires continual access to substantial short and long-term credit to generate its new equipment financings and sales. The principal sources of funding for the Company's equipment finance contracts are (i) funding obtained from sales of asset-backed securities (backed by pools of the Company's equipment finance contracts) to SunAmerica Life Insurance Company ("SunAmerica") and First Union N.A., pursuant to the terms of each securitization arrangement, (ii) nonrecourse borrowings from institutional lenders, and (iii) standard recourse borrowings under its revolving line of credit ("Revolver") which was increased from $17 million to $20 million in April 1998, used by the Company from time to time to temporarily fund a portion of its equipment finance contracts, pending more permanent funding arrangements for such contracts, and (iv) $7 million working capital line of credit. The Company has $142 million available in its securitization facilities for future sales of asset backed securities, as well as $15.0 million available credit related to the Revolver and working capital line of credit as of September 30, 1998. CASHFLOWS. The Company's cash and cash equivalents at September 30, 1998 was $3.1 million compared to $1.1 million at September 30, 1997. During the nine months ended September 30, 1998, the Company's cash 6 position increased by $2.1 million, reflecting the use of cash in operations and financing activities of $5.7 million and $3.9 million, respectively and the cash provided by investing activities of $11.7 million. The most significant aspects of the change during this period was from cash invested in equipment for financing of $168.6 million, increases in receivables and prepaids of $9.1 million, increases in accounts payable and accrued liabilities of $14.7 million and proceeds from sales and assignments of leases and payments received from lessees of $185.5 million. This was largely due to the higher level of the Company's finance contract originations. In comparison, the Company's cash position decreased by $3.2 million during the nine months ended September 30, 1997, reflecting the use of cash in operations and financing activities of $9.8 million and $8.1 million, respectively, and the cash provided by financing activities of $14.7 million. The change in cash was primarily due to cash used to purchase equipment for financing of $122.2 million, increase in restricted cash of $7.8 million and proceeds from sales and assignments of leases and payments from lessees of $144.0 million. The Company believes that existing cash balances, cash flows from activities, proceeds from securitization arrangements, nonrecourse assignments, and bank credit lines will be sufficient to meet its financing needs for the next twelve months. IMPACT OF INFLATION The Company funds a majority of its equipment finance contracts with fixed rate loans in order to maintain a spread between the interest rates charged to the Company and those implicit in the financing the Company provides. Due to this timely matching of finance contract yields with funding rates, the Company generally has mitigated the effects of rising interest rates during inflationary periods. General inflation in the economy has driven upward the operating expenses of many businesses, and accordingly, the Company has increased salaries and borne higher prices for most other goods and services. The Company continuously seeks methods of reducing costs and streamlining operations while maximizing efficiencies and internal operating controls through development of cost reducing funding mechanisms, such as the securitization program, and through systems automation and enhancement. While the Company is subject to inflation as described above, the Company believes that inflation does not have a material effect on its operating results. YEAR 2000 COMPLIANCE The Company recognizes the uncertainty regarding the effect of the year 2000 problem as it relates to computer systems properly identifying and distinguishing the year 2000 from the year 1900. The Company's major operating, financial and telecommunication systems are licensed or purchased from well known vendors in the information technology market. The Company has determined, through discussions and documentation provided by its vendors, that the majority of its software and hardware systems are year 2000 compliant. In specific cases the Company is working with its vendors to install system upgrades which would be year 2000 compliant. The Company plans to be fully compliant by December 31, 1999. The cost of becoming year 2000 compliant has been minimal and future cost of compliance are not expected to have a material adverse effect on the future results of operations for the Company. The Company is aware a system failure may adversely effect revenues in the short term, however the Company does not believe this will have a material effect on the Company's results of operations, liquidity, and financial position. The Company is developing a contingency plan which will help insure a continuity of operations which should be completed in the first quarter of 1999. Although the Company believes it will be year 2000 compliant by December 31, 1999, the company can not measure the impact of the year 2000 problem as it relates to vendors, suppliers, and other parties with which the Company conducts business, some of which may have an adverse impact on future results of operations. 7 SAFE HARBOR STATEMENT Statements which are not historical facts, including statements about the Company's confidence and strategies and its expectations regarding reductions in cost of funds, plans to increase market share, plans to enter new markets, and the impact of SFAS No. 125 are forward looking statements that involve risks and uncertainties. These include but are not limited to (i) reducing borrowing costs by expanding the Company's asset-backed securitization funding program; (ii) increasing origination of equipment finance contracts by maintaining and expanding strategic relationships with vendors of medical and medical-related equipment; (iii) increasing business with high volume vendors; (iv) increasing its financing of non-medical equipment; (v) expanding into new market niches and the international market; (vi) reducing indirect costs associated with the Company's financings; (vii) minimizing delinquencies relating to contracts retained and serviced by the Company, as well as contracts held by the Company's lenders; (viii) the Company's ability to realize the residual equipment value reflected on its balance sheet; (ix) maintaining a diverse base of customers to which the Company provides equipment financing; (x) successfully enlarging the Company's sales force and the Company's geographic penetration of the medical equipment market; and (xi) the size and growth rate of the medical equipment leasing industry. The historical results achieved are not necessarily indicative of future prospects of the Company. The forward-looking statements included herein are based upon current expectations that involve a number of risks and uncertainties. These forward- looking statements are based upon assumptions that the Company will continue to finance equipment on a regular and predictable basis, that competitive conditions within the equipment financing market will not change materially or adversely, that the equipment financing market will continue to experience steady growth, that demand for the Company's financing will remain strong, that the Company will retain existing sales representatives and key management personnel, that the Company's will accurately anticipate market demand that planned financing arrangements will be completed satisfactorily and that there will be no material adverse change in the Company's operations or business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the results contemplated in the forward looking statements will be realized. In addition, as disclosed above, the business and operations of the Company are subject to substantial risks which increase the uncertainty inherent in such forward-looking statements. Any of the other factors disclosed above could cause the Company's net income or growth in net income to differ materially from prior results. 8 PART II--OTHER INFORMATION ITEM 1--LEGAL PROCEEDINGS--NOT APPLICABLE ITEM 2--CHANGES IN SECURITIES--NOT APPLICABLE ITEM 3--DEFAULTS UPON SENIOR SECURITIES--NOT APPLICABLE ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ITEM 5--OTHER INFORMATION ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 10.36 Employment Agreement, dated as of January 1, 1998 between the Registrant and Gerry Ricco. 10.37 Employment Agreement, dated as of January 1, 1998 between the Registrant and Brian Seigel. 10.38 Employment Agreement, dated as of January 1, 1998 between the Registrant and Larry Hartmann. 10.39 Amended, Restated and Consolidated Pooling and Servicing Agreement dated August 28, 1997, by and among Rockford Limited I, the registrant, Texas Commerce Bank National Association and Sun America Life Insurance Company. 10.40 Amended, Restated and Consolidated Equipment and Lease Purchase Agreement dated August 28, 1997, by and between Rockford Limited I, and the registrant. 10.41 Purchase Agreement dated August 28, 1997, by and among Rockford Limited I, the registrant, Texas Commerce Bank National Association and Sun America Life Insurance Company. 10.42 First Amendment to Amended, Restated and Consolidated Pooling and Servicing Agreement dated April 8, 1998, by and among Rockford Limited I, the registrant, Chase Bank of Texas, N.A., f/k/a Texas Commerce Bank National Association and Sun America Life Insurance Company. 10.43 First Amendment to Amended, Restated and Consolidated Equipment and Lease Purchase Agreement dated April 8, 1998 by and between Rockford Limited I, and the registrant. 10.44 First Amendment to Purchase Agreement dated April 8, 1998, by and among Rockford Limited I, the registrant, Chase Bank of Texas, N.A., f/k/a Texas Commerce Bank National Association and Sun America Life Insurance Company. 27 Financial Data Schedule
(b) Reports on Form 8-K; No reports were filed on form 8-K during the quarter for which this report is filed. 9 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Rockford Industries, Inc. (Registrant) Date: November 13, 1998 /s/ Gerry J. Ricco ________________________________________ Gerry J. Ricco President, Chief Executive Officer and Director (Principal Executive Officer) Date: November 13, 1998 /s/ Kevin McDonnell ________________________________________ Kevin McDonnell Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 10 EX-10.36 2 EMPLOYMENT AGREEMENT EXHIBIT 10.36 EMPLOYMENT AGREEMENT -------------------- This Employment Agreement (as the same may be supplemented, modified, amended or restated from time to time in the manner provided herein, this "Agreement") dated as of _______________, 1998, between Gerry Ricco, an individual residing at 45 Fortuna, Irvine, California 92720 (the "Employee"), and Rockford Industries, Inc., a California corporation (the "Company") with principal offices at 1851 East First Street, Suite 600, Santa Ana, CA 92705. WHEREAS, the Company desires to employ the Employee, and the Employee desires to be employed by the Company, all upon the terms and provisions and subject to the conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: Section 1. Employment and Term. The Company hereby employs the ------------------- Employee as President and Chief Executive Officer of the Company and the Employee hereby accepts such employment, upon the terms and provisions and subject to the conditions set forth below for a term commencing on January 1, 1998 (the "Commencement Date") and terminating on the third anniversary of the Commencement Date, unless sooner terminated as herein provided (the "Employment Term"). This Agreement shall be automatically renewed for successive three (3) year terms after the expiration of the Employment Term and each subsequent renewal term, unless one party or the other gives notice, in writing, at least sixty (60) days prior to the expiration of the Employment Term or renewal term of their desire to terminate the Agreement or modify its terms. Section 2. Employee's Duties. (a) The Employee shall perform all ----------------- duties and services incident to and not inconsistent with Employee's positions with the Company, including, but not limited to, those duties as are assigned to such offices in the Company's by-laws and such other duties as may from time to time be assigned to him by the Board of Directors of the Company, or otherwise, subject in all cases to the authority and supervision of the Board of Directors of the Company and such limitations as from time to time may be imposed by it. (b) Employee agrees to abide by all policies of the Company promulgated from time to time by the Company. (c) Except for such business travels as may be incident to his duties hereunder, the Employee shall perform his duties at the Company's offices at the address set forth in the preamble to this Agreement or at such other location within 15 miles of such address. (d) The Employee shall devote all of his time (during regular business hours), effort and attention to the business and affairs of the Company and to the furtherance of the interests of the business of the Company. The Employee shall diligently and faithfully perform his duties and services hereunder to the best of his ability and with the highest of professional standards and integrity. The Employee will not, directly or indirectly, engage in any other business or enterprise requiring his personal time or attention, other than: (i) at the direction and for the benefit of the Company; (ii) to the extent approved in writing by the Company; or (iii) personal investments in securities. Section 3. Compensation for Employee's Services. (a) For the full, ------------------------------------ prompt and faithful performance of all of the duties and services to be performed by the Employee pursuant to Sections 1 and 2 hereof, the Company agrees to pay, and the Employee agrees to accept, during the first year of the Employment Term an annual base salary (the "Salary") equal to $236,250, less all necessary and required federal, state and local payroll deductions, payable in accordance with the usual payroll practices of the Company. For each successive year during the Employment Term (and any renewal term), Employee's Salary shall be increased by the greater of (1) five percent (5%) or (ii) the percentage increase in the Consumer Price Index for the previous calendar year. (b) In addition to the Salary, each year during the Employment Term (and any renewal term) Employee shall be eligible to receive a bonus pursuant to the terms and conditions of each Annual Bonus Plan established by the Company's Board of Directors. The target for each annual bonus shall be twenty-five percent (25%) of Employee's Salary. The specific criteria and levels in each Annual Bonus Plan shall be established in the discretion of the Board of Directors but will include consideration for Company performance, including earnings per share and originations, and Employee's individual performance. The Board of Director's shall communicate the terms of the Annual Bonus Plan to Employee on or before January 31st each year during the Employment Term (and any renewal term). (c) For each calendar year during the Employment Term (and any renewal term), Employee shall be entitled to paid vacation according to the following schedule: YEARS OF SERVICE WITH COMPANY VACATION Less than 10 years 4 weeks More than 10 years 5 weeks The Employee shall take such vacation at such time or times as shall be mutually agreed upon with the Company. The maximum amount of vacation time that Employee may have on the Company's books at any time shall be one year's vacation allotment. (d) During the Employment Term (and any renewal term), the Employee shall be entitled, at no cost to Employee, to such insurance and health and medical benefits as are from time to time in effect and are generally made available to other similar employees of the Company pursuant to the policies of the Company; provided, however, that the -------- ------- ---- 2 Employee shall be required to comply with the conditions attendant to coverage and shall comply with and be entitled to benefits only in accordance with the terms and conditions of such coverage. The Company may withhold from any benefits payable to the Employee all federal, state, local or other taxes and amounts as shall be permitted or required pursuant to law, rule or regulation. (e) During the Employment Term (and any renewal term), the Employee shall be eligible to participate in the pension, compensation and bonus plans or programs that from time to time are made available to other employees of the Company, subject to any applicable waiting periods, all in accordance with the terms and provisions of such plans or programs. (f) During the Employment Term (and any renewal term), the Company shall pay expenses up to $1,500.00 per month incurred by Employee in connection with the lease or ownership of an automobile to be used primarily for Company business and for all related expenses. (g) During the Employment Term (and any renewal term), the Company shall reimburse Employee up to $12,000.00 per year for the annual dues for membership in one (1) country club or other perquisites of equivalent monetary value, at the discretion of the Employee. (h) During the Employment Term (and any renewal term), the Company shall maintain a policy of life insurance for Employee in a face amount not less than two times Employee's then existing base salary. Employee shall designate, at his discretion, the beneficiary of such life insurance. Section 4. Expenses. The Employee shall be entitled to reimbursement -------- for his ordinary and necessary business expenses actually incurred during the Employment Term in the performance of his duties under Sections 1 and 2 of this Agreement, if and to the extent supported by such reasonable documentation as may be requested by the Company. Section 5. Termination of Employment Term. ------------------------------ (a) In the event of the death of the Employee during the term of his employment (or any renewal term), the Employee's employment shall terminate and this Agreement shall terminate on the date of such death; provided, however, -------- ------- that the Employee, his estate or legal representative, as the case may be, shall - ---- be entitled to receive, and the Company shall pay, any unpaid Salary and other benefits and reimbursable expenses accrued and owing to the Employee with respect to his employment prior to the termination. The sum of such amounts shall hereinafter be referred to as the "Accrued Obligations" which shall be paid to Employee's estate or beneficiary within thirty (30) days of the date of termination. 3 (b) If the Company determines in good faith that the Disability of Employee has occurred (pursuant to the definition of Disability set forth below), it may give to Employee written notice of its intention to terminate Employee's employment. In such event, Employee's employment with the Company shall terminate effective on the 30th day after receipt of such notice by Employee, provided that, within the 30 days after such receipt, Employee shall not have returned to full-time performance of his duties. For the purposes of this Agreement, "Disability" shall mean a physical or mental impairment which substantially limits a major life activity of Employee and which renders Employee unable to perform the essential functions of his position, even with reasonable accommodation which does not impose an undue hardship on the Company and which has lasted at least 120 consecutive days. In the event of termination of this Agreement on account of Employee's disability, within thirty (30) days of termination of this Agreement, the Company shall pay to Employee (i) all Accrued Obligations and (ii) a lump sum amount equal to one year of Employee's salary and his most recent bonus. In addition, the Company shall reimburse Employee for any payments made by him to the Company (or its insurance carrier) for the purpose of continuation of his medical and dental insurance under the provisions of the Consolidated Omnibus Reconciliation Act (COBRA). (c) The Company shall have the right to terminate the Employee's employment and to terminate this Agreement, in the event: (i) the Employee fails to substantially perform or repeatedly neglects his duties assigned in accordance with this Agreement in any continuing manner after notice from the Company of such failure or neglect; (ii) the Employee willfully fails or refuses to substantially follow or comply with the directions of the Board of Directors or of a superior officer or the policies or work rules of the Company; (iii) the Employee through his intentional action or inaction has subjected the Company to any criminal or civil liability under any applicable law; (iv) the Employee is indicted or convicted for any misdemeanor involving moral turpitude or any felony; (v) the Employee has used any narcotic or other illegal or controlled substance or abused or otherwise excessively used any alcoholic product or any prescription stimulant or depressant and such abuse or excessive use has interfered with Employee's performance of his duties hereunder; (vi) the Employee has misappropriated any asset or property of the Company, including (without limitation) any theft or embezzlement or any diversion of any corporate opportunity; (vii) the Employee has breached any of his covenants and agreements contained in this Agreement, including (without limitation) those contained in Section 7 hereof; or (viii) the Employee concealed or misrepresented any material fact in seeking employment hereunder. The Employee acknowledges and agrees that any of the foregoing reasons constitute adequate and sufficient cause for termination, and if the Company elects such termination, the Employee shall be entitled to receive only the Accrued Obligations (which, however, shall be subject to offset by the Company with respect to all amounts then owing to the Company by the Employee, including amounts respecting misappropriated assets and properties). (d) Employee shall have the right to terminate his employment and this Agreement by giving written notice of such termination within sixty (60) days of the occurrence of any of the following events: (i) The Company materially changes Employee's title, duties, scope of responsibility, or reporting relationship; or (ii) Employee is required to perform his principal duties at a location more than 25 miles from the Company's address set forth in the preamble to this Agreement. The purchase of the Company by another entity which 4 subsequently operates the Company as a wholly owned subsidiary shall not constitute a material change under clause (i) above so long as Employee's duties and scope of responsibilities within the Company are not materially changed. In the event of termination of this Agreement pursuant to this subsection, within thirty (30) days of termination of this Agreement, the Company shall pay to Employee (i) all Accrued Obligations and (ii) a lump sum amount equal to Employee's salary and target bonus for the remainder of the Employment Term (or renewal term) but not less than one years' salary and target bonus. (e) Any termination under this Section or termination of Employee's duties under Sections 1 and 2 of this Agreement, whether by the Employee or by the Company, shall be communicated by a notice of termination to the other party hereto, which shall set forth the facts and circumstances respecting such termination; provided, however, that no notice of termination -------- ------- ---- need be given in the event of the death of the Employee. (f) The Employee acknowledges and agrees that any termination under this Section is not intended, and shall not be deemed or construed, in any way to affect any of the Employee's covenants and obligations contained in Sections 7, 8, and 9 hereof, which shall continue in full force and effect. (g) In the event the Company exercises its right not to renew this Agreement pursuant to Section 1 or terminates the Employee's employment hereunder, other than pursuant to Sections 5(a), 5(b), 5(c) or 6(a), the Company shall pay to the Employee within thirty (30) days of termination (i) all Accrued Obligations and (ii) a lump sum amount equal to Employee's salary and target bonus for the remainder of the Employment Term (or renewal term) but not less than one years' salary and target bonus. Section 6. Change in Control-Termination of Employment and ----------------------------------------------- Compensation in Event of Termination. (a) After a Change in Control of the - ------------------------------------ Company (as such term is hereinafter defined) has occurred, if the Company (or any successor thereto) terminates the Employee's employment with the Company within one year after the Change in Control, the Employee (i) shall be entitled to his salary, bonuses, awards, perquisites and benefits, including, without limitation, benefits and awards under the Company's stock option plans and the Company's pension and retirement plans and programs, accrued through the date the Employee's employment with the Company is terminated (the "Termination Date") and, in addition, thereto, (ii) shall be entitled to be paid in a lump- sum, on the Termination Date, an amount of cash (to be computed, at the expense of the Company, by the partner of Deloitte & Touche, LLP, independent certified public accountants to the Company or such other independent certified accountants regularly employed by the Company (the "Accountants") in charge of the Company's account immediately prior to the Change in Control, whose computation shall be conclusive and binding upon the Employee and the Company) equal to 2.99 times Employee's "base amount" as defined in Section 280G(b)(3) of the Internal Revenue Code of 1986, as amended (the "Code"). Such lump-sum payment is hereinafter referred to as the "Termination Compensation." 5 (b) For purposes hereof, a Change in Control shall be deemed to have occurred if there has occurred a change in control as the term "control" is defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended (the "Act"), as follows: (i) when any "person" (as such term is defined in Sections 3(a)(9) and 13(d)(3) of the Act, except for an employee stock ownership trust (or any of the trustees thereof), becomes a beneficial owner, after the date hereof, directly or indirectly, of securities of the Company representing twenty (20%) percent or more of the Company's then outstanding common stock, no par value per share; (ii) if the stockholders of the Company approve a plan of complete liquidation of the Company; or (iii) if the stockholders of the Company approve an agreement for the sale or disposition of all or substantially all of the Company's assets. Notwithstanding the foregoing, no Change in Control shall be deemed to have occurred as a result of any event specified in clauses (i)-(iii) of this paragraph 4(b) if a majority of the Board of Directors approve such transaction prior to its occurrence. (c) Notwithstanding anything in this Agreement to the contrary, Employee shall have the right at his discretion to defer the Company's payment of all or part of the Termination Compensation to a subsequent year or years, provided that the Company shall not be required to pay the total Termination Compensation in more than five (5) payments. Employee shall provide written notice to the Company of any such deferral election in accordance with Section 11 of this Agreement. (d) It is intended that the "present value" of the payments and benefits to Employee, whether under this agreement or otherwise, which are includable in the computation of "parachute payments" shall not, in the aggregate, exceed 2.99 times the "base amount" (the terms "present value," "parachute payments" and "base amount" being determined in accordance with Section 280G of the Code). Accordingly, if Employee receives payments or benefits from the Company prior to payment of the Termination Compensation which, when added to the Termination Compensation, would, in the opinion of the Accountants, subject any of the payments or benefits to Employee to the excise tax imposed by Section 4999 of the Code, the Termination Compensation shall be reduced by the smallest amount necessary, in the opinion of the Accountants, to avoid such tax. In addition, the Company shall have no obligation to make any payment or provide any benefit to Employee subsequent to payment of the Termination Compensation which, in the opinion of the Accountants, would subject any of the payments or benefits to Employee to the excise tax imposed by Section 4999 of the Code. No reduction in Termination Compensation or release of the Company from any payment or benefit obligation in reliance upon any aforesaid opinion of the Accountants shall be permitted unless the Company shall have provided to Employee a copy of any such opinion, specifically entitling Employee to rely thereon, no later than the date otherwise required for payment of the Termination Compensation or any such later payment or benefit. Section 7. Restrictions Respecting Confidential Information. (a) The ------------------------------------------------ Employee has entered into the covenants and agreements contained in this Section 7 (i) in recognition of the competitive and confidential nature of the assets, properties, information and business of the Company, and (ii) in consideration of the compensation described in this Agreement. 6 (b) The Employee hereby covenants and agrees that, during the Employment Term and thereafter, the Employee will not, and will not cause, suffer or permit any family member living within his household or other affiliate of the Employee to, directly or indirectly, under any circumstance: (i) disclose in any way any Confidential Information (as hereinafter defined) to any other person; (ii) act or fail to act so as to reveal any Confidential Information or otherwise impair the confidential or proprietary nature of any Confidential Information; (iii) use any customer list, or other Confidential Information other than at the direction and for the benefit of the Company; or (iv) offer or agree to, or cause or assist in the inception or continuation of, any such disclosure, impairment or use. For the purposes of the foregoing, "Confidential Information" shall mean any and all information pertaining to the assets, business, creditors, vendors, manufacturers, customers, data, employees, financial condition or affairs, formulae, methods, operations, procedures, reports, suppliers, systems and technologies of the Company, including (without limitation) the contracts, patents, trade secrets and customer lists developed or otherwise acquired by the Company during the Employment Term; provided, -------- however, that Confidential Information shall exclude any information that is or - ------- ---- becomes publicly available other than through disclosure (A) by the Employee or any of his family members or (B) by the Company, or any of its directors, officers, employees, consultants, agents or other representatives or affiliates. All Confidential Information is and will remain the sole and exclusive property of the Company. Following the Employment Term, the Employee shall exercise reasonable efforts to return all documents and other tangible items containing Confidential Information to the Company, without retaining any copies, notes or excerpts thereof, or to destroy such documents and items, as the Company may request. (c) Notwithstanding anything to the contrary in this Agreement, the terms and provisions of this Section and Sections 8 through 18 of this Agreement, together with any definitions used in such terms and provisions, shall survive the termination or expiration of the Employee's employment under Sections 1 and 2 hereof, irrespective of (i) the reason therefor, and (ii) whether such termination was permitted hereunder or under applicable law and the Company will have the right to communicate with any future or prospective employer concerning Employee's continuing obligations under this Agreement. Section 8. Enforcement, Etc. The Company, in its sole discretion, ---------------- may proceed to exercise or enforce any right, power, privilege, remedy or interest that the Company may have under this Agreement or applicable law: at law, in equity, in rem or in any other forum available under applicable law; without notice except as otherwise expressly provided herein; without pursuing, exhausting or otherwise exercising or enforcement any other right, power, privilege, remedy or interest that the Company may have against or in respect of the Employee or any other person or thing; and without regard to any act or omission of the Company or any other person. The Company may institute one or more proceedings (which may be separate proceedings) with respect to this Agreement in such order and at such times as the Company may elect in its sole and absolute discretion. Section 9. Equitable Relief. The Employee acknowledges and agrees ---------------- that it will be impossible to measure in money the damage to the Company in the event of a breach of any of the terms and provisions of Section 7 of this Agreement, and that, in the event of any such breach, the Company will not have an adequate remedy at law, although the foregoing shall not 7 constitute a waiver of any of the Company's rights, powers, privileges and remedies against or in respect of a breaching party or any other person or thing under this Agreement, or applicable law. It is therefore agreed that the Company, in addition to all other such rights, powers, privileges and remedies that it may have, shall be entitled to injunctive relief, specific performance or such other equitable relief as the Company may request to exercise or otherwise enforce any of those terms and provisions and to enjoin or otherwise restrain any act prohibited thereby, and the Employee will not raise and hereby waives any objection or defense that there is an adequate remedy available at law. Section 10. Representations and Warranties of Employee. ------------------------------------------ (a) (i) In order to induce the Company to enter into this Agreement, the Employee represents and warrants to the Company that: (i) the execution and delivery of this Agreement by the Employee and the performance of his obligations hereunder will not violate or be in conflict with any fiduciary or other duty, instrument, agreement, document, arrangement or other understanding to which the Employee is a party or by which he is or may be bound or subject; and (ii) the Employee is not a party to any instrument, agreement, document, arrangement or other understanding with any person (other than the Company) requiring or restricting the use or disclosure of any confidential information or the provision of any employment, consulting or other services. (b) The Employee hereby agrees to indemnify and hold harmless the Company from and against any and all losses, costs, damages and expenses (including without limitation, its reasonably attorneys' fees) incurred or suffered by the Company resulting from any breach by the Employee of any of his representations or warranties set forth in Section 10(a) hereof. Section 11. Notice. Except as otherwise expressly provided, any ------ notice, request, demand or other communication permitted or required to be given hereunder shall be in writing, shall be sent by one of the following means to the addressee at the address set forth in the preamble to this Agreement (or at such other address as shall be designated hereunder by notice to the other party hereto, effective upon actual receipt) and shall be deemed conclusively to have been given: (i) on the first business day following the day timely deposited with Federal Express (or other equivalent national overnight courier) or United States Express Mail, with the cost of delivery prepaid or for the account of the sender; (ii) on the fifth business day following the day sent by certified or registered United States mail, postage prepaid and return receipt requested; or (iii) when otherwise actually received by the addressee on a business day (or on the next business day if received after the close of normal business hours or on any non-business day). If a certificate, signed notice or other signed item is expressly required by another provision of this Agreement, a manually signed original must be delivered by the party giving it; any other notice, request, demand or other communication also may be sent by telecopy, with the cost of transmission prepaid or for the account of the sender, and shall (except as otherwise specified in this Agreement) be deemed conclusively to have been given on the first business day following the day duly sent. 8 Section 12. Section and Other Headings. The section and other -------------------------- headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. Section 13. Governing Law. This Agreement has been executed and ------------- delivered, and shall be governed by and construed in accordance with the applicable laws pertaining, in the State of California. Section 14. Severability. In the event that any term or provision of ------------ this Agreement shall be finally determined to be superseded, invalid, illegal or otherwise unenforceable pursuant to applicable law by a governmental authority having jurisdiction and venue, that determination shall not impair or otherwise affect the validity, legality or enforceability, to the maximum extent permissible by law, (a) by or before that authority of the remaining terms and provisions of this Agreement, which shall be enforced as if the unenforceable term or provision were deleted, or (b) by or before any other authority of any of the terms and provisions of this Agreement. If any provision of Section 7 hereof is held to be unenforceable because of the scope or duration of any such provision, the parties agree that any court making such determination shall have the power to reduce the scope or duration of such provision, and said provision shall be enforceable in such reduced form. Section 15. Counterparts. This Agreement may be executed in two ------------ counterpart copies of the entire document or of signature pages to the document, each of which may be executed by one of the parties hereto, but all of which, when taken together, shall constitute a single agreement binding upon both of the parties hereto. Section 16. Successors and Assigns; Assignment. Whenever in this ---------------------------------- Agreement reference is made to any party, such reference shall be deemed to include the successors, assigns, heirs and legal representatives of such party, and, without limiting the generality of the foregoing, all representations, warranties, covenants and other agreements made by or on behalf of the Employee in this Agreement shall inure to the benefit of the successors and assigns of the Company; provided, however, that nothing herein shall be deemed to authorize -------- ------- ---- or permit the Employee to assign any of his rights or obligations under this Agreement to any other person (whether or not a family member or other affiliate of the Employee), and the Employee covenants and agrees that he shall not make any such assignment. Section 17. Modification, Amendment, Etc. Each and every ---------------------------- modification and amendment of this Agreement shall be in writing and signed by all of the parties hereto, and each and every waiver of, or consent to any departure from, any representation, warranty, covenant or other term or provision of this Agreement shall be in writing and signed by each affected party hereto. Section 18. Entire Agreement. This Agreement contains the entire ---------------- agreement of the parties and supersedes all other representations, warranties, agreements and understandings, oral or otherwise, among the parties with respect to the matters contained herein. 9 In Witness Whereof, the parties hereto have executed and delivered this Agreement as of the date first above written. Employee Name: Gerry Ricco Rockford Industries, Inc. Name: ___________________ Title: __________________ 10 EX-10.37 3 EMPLOYMENT AGREEMENT EXHIBIT 10.37 EMPLOYMENT AGREEMENT -------------------- This Employment Agreement (as the same may be supplemented, modified, amended or restated from time to time in the manner provided herein, this "Agreement") dated as of _________________, 1998, between Brian A. Seigel, an individual residing at 19691 Vista Del Valle, Santa Ana, California 92705 (the "Employee"), and Rockford Industries, Inc., a California corporation (the "Company") with principal offices at 1851 East First Street, Suite 600, Santa Ana, CA 92705. WHEREAS, the Company desires to employ the Employee, and the Employee desires to be employed by the Company, all upon the terms and provisions and subject to the conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: Section 1. Employment and Term. The Company hereby employs the ------------------- Employee as Executive Vice President of Marketing of the Company and the Employee hereby accepts such employment, upon the terms and provisions and subject to the conditions set forth below for a term commencing on January 1, 1998 (the "Commencement Date") and terminating on the third anniversary of the Commencement Date, unless sooner terminated as herein provided (the "Employment Term"). This Agreement shall be automatically renewed for successive three (3) year terms after the expiration of the Employment Term and each subsequent renewal term, unless one party or the other gives notice, in writing, at least sixty (60) days prior to the expiration of the Employment Term or renewal term of their desire to terminate the Agreement or modify its terms. Section 2. Employee's Duties. (a) The Employee shall perform all ----------------- duties and services incident to and not inconsistent with Employee's positions with the Company, including, but not limited to, those duties as are assigned to such offices in the Company's by-laws and such other duties as may from time to time be assigned to him by the Board of Directors of the Company, or otherwise, subject in all cases to the authority and supervision of the Board of Directors of the Company and such limitations as from time to time may be imposed by it. (b) Employee agrees to abide by all policies of the Company promulgated from time to time by the Company. (c) Except for such business travels as may be incident to his duties hereunder, the Employee shall perform his duties at the Company's offices at the address set forth in the preamble to this Agreement or at such other location within 15 miles of such address. (d) The Employee shall devote all of his time (during regular business hours), effort and attention to the business and affairs of the Company and to the furtherance of the interests of the business of the Company. The Employee shall diligently and faithfully perform his duties and services hereunder to the best of his ability and with the highest of professional standards and integrity. The Employee will not, directly or indirectly, engage in any other business or enterprise requiring his personal time or attention, other than: (i) at the direction and for the benefit of the Company; (ii) to the extent approved in writing by the Company; or (iii) personal investments in securities. Section 3. Compensation for Employee's Services. (a) For the full, ------------------------------------ prompt and faithful performance of all of the duties and services to be performed by the Employee pursuant to Sections 1 and 2 hereof, the Company agrees to pay, and the Employee agrees to accept, during the first year of the Employment Term an annual base salary (the "Salary") equal to $236,250, less all necessary and required federal, state and local payroll deductions, payable in accordance with the usual payroll practices of the Company. For each successive year during the Employment Term (and any renewal term), Employee's Salary shall be increased by the greater of (1) five percent (5%) or (ii) the percentage increase in the Consumer Price Index for the previous calendar year. (b) In addition to the Salary, each year during the Employment Term (and any renewal term) Employee shall be eligible to receive a bonus pursuant to the terms and conditions of each Annual Bonus Plan established by the Company's Board of Directors. The target for each annual bonus shall be twenty-five percent (25%) of Employee's Salary. The specific criteria and levels in each Annual Bonus Plan shall be established in the discretion of the Board of Directors but will include consideration for Company performance, including earnings per share and originations, and Employee's individual performance. The Board of Director's shall communicate the terms of the Annual Bonus Plan to Employee on or before January 31st each year during the Employment Term (and any renewal term). (c) For each calendar year during the Employment Term (and any renewal term), Employee shall be entitled to paid vacation according to the following schedule: YEARS OF SERVICE WITH COMPANY VACATION Less than 10 years 4 weeks More than 10 years 5 weeks The Employee shall take such vacation at such time or times as shall be mutually agreed upon with the Company. The maximum amount of vacation time that Employee may have on the Company's books at any time shall be one year's vacation allotment. (d) During the Employment Term (and any renewal term), the Employee shall be entitled, at no cost to Employee, to such insurance and health and medical benefits as are from time to time in effect and are generally made available to other similar employees of the Company pursuant to the policies of the Company; provided, however, that the Employee shall be required to comply -------- ------- with the conditions attendant to coverage and shall 2 comply with and be entitled to benefits only in accordance with the terms and conditions of such coverage. The Company may withhold from any benefits payable to the Employee all federal, state, local or other taxes and amounts as shall be permitted or required pursuant to law, rule or regulation. (e) During the Employment Term (and any renewal term), the Employee shall be eligible to participate in the pension, compensation and bonus plans or programs that from time to time are made available to other employees of the Company, subject to any applicable waiting periods, all in accordance with the terms and provisions of such plans or programs. (f) During the Employment Term (and any renewal term), the Company shall pay expenses up to $1,500.00 per month incurred by Employee in connection with the lease or ownership of an automobile to be used primarily for Company business and for all related expenses. (g) During the Employment Term (and any renewal term), the Company shall reimburse Employee up to $12,000.00 per year for the annual dues for membership in one (1) country club or other perquisites of equivalent monetary value, at the discretion of the Employee. (h) During the Employment Term (and any renewal term), the Company shall maintain a policy of life insurance for Employee in a face amount not less than two times Employee's then existing base salary. Employee shall designate, at his discretion, the beneficiary of such life insurance. Section 4. Expenses. The Employee shall be entitled to reimbursement -------- for his ordinary and necessary business expenses actually incurred during the Employment Term in the performance of his duties under Sections 1 and 2 of this Agreement, if and to the extent supported by such reasonable documentation as may be requested by the Company. Section 5. Termination of Employment Term. ------------------------------ (a) In the event of the death of the Employee during the term of his employment (or any renewal term), the Employee's employment shall terminate and this Agreement shall terminate on the date of such death; provided, however, that the Employee, his estate or legal representative, as the - -------- ------- ---- case may be, shall be entitled to receive, and the Company shall pay, any unpaid Salary and other benefits and reimbursable expenses accrued and owing to the Employee with respect to his employment prior to the termination. The sum of such amounts shall hereinafter be referred to as the "Accrued Obligations" which shall be paid to Employee's estate or beneficiary within thirty (30) days of the date of termination. (b) If the Company determines in good faith that the Disability of Employee has occurred (pursuant to the definition of Disability set forth below), it may give to 3 Employee written notice of its intention to terminate Employee's employment. In such event, Employee's employment with the Company shall terminate effective on the 30th day after receipt of such notice by Employee, provided that, within the 30 days after such receipt, Employee shall not have returned to full-time performance of his duties. For the purposes of this Agreement, "Disability" shall mean a physical or mental impairment which substantially limits a major life activity of Employee and which renders Employee unable to perform the essential functions of his position, even with reasonable accommodation which does not impose an undue hardship on the Company and which has lasted at least 120 consecutive days. In the event of termination of this Agreement on account of Employee's disability, within thirty (30) days of termination of this Agreement, the Company shall pay to Employee (i) all Accrued Obligations and (ii) a lump sum amount equal to one year of Employee's salary and his most recent bonus. In addition, the Company shall reimburse Employee for any payments made by him to the Company (or its insurance carrier) for the purpose of continuation of his medical and dental insurance under the provisions of the Consolidated Omnibus Reconciliation Act (COBRA). (c) The Company shall have the right to terminate the Employee's employment and to terminate this Agreement, in the event: (i) the Employee fails to substantially perform or repeatedly neglects his duties assigned in accordance with this Agreement in any continuing manner after notice from the Company of such failure or neglect; (ii) the Employee willfully fails or refuses to substantially follow or comply with the directions of the Board of Directors or of a superior officer or the policies or work rules of the Company; (iii) the Employee through his intentional action or inaction has subjected the Company to any criminal or civil liability under any applicable law; (iv) the Employee is indicted or convicted for any misdemeanor involving moral turpitude or any felony; (v) the Employee has used any narcotic or other illegal or controlled substance or abused or otherwise excessively used any alcoholic product or any prescription stimulant or depressant and such abuse or excessive use has interfered with Employee's performance of his duties hereunder; (vi) the Employee has misappropriated any asset or property of the Company, including (without limitation) any theft or embezzlement or any diversion of any corporate opportunity; (vii) the Employee has breached any of his covenants and agreements contained in this Agreement, including (without limitation) those contained in Section 7 hereof; or (viii) the Employee concealed or misrepresented any material fact in seeking employment hereunder. The Employee acknowledges and agrees that any of the foregoing reasons constitute adequate and sufficient cause for termination, and if the Company elects such termination, the Employee shall be entitled to receive only the Accrued Obligations (which, however, shall be subject to offset by the Company with respect to all amounts then owing to the Company by the Employee, including amounts respecting misappropriated assets and properties). (d) Employee shall have the right to terminate his employment and this Agreement by giving written notice of such termination within sixty (60) days of the occurrence of any of the following events: (i) The Company materially changes Employee's title, duties, scope of responsibility, or reporting relationship; or (ii) Employee is required to perform his principal duties at a location more than 25 miles from the Company's address set forth in the preamble to this Agreement. The purchase of the Company by another entity which subsequently operates the Company as a wholly owned subsidiary shall not constitute a material change under clause (i) above so long as Employee's duties and scope of responsibilities within the Company are not materially changed. In the event of termination of this Agreement pursuant 4 to this subsection, within thirty (30) days of termination of this Agreement, the Company shall pay to Employee (i) all Accrued Obligations and (ii) a lump sum amount equal to Employee's salary and target bonus for the remainder of the Employment Term (or renewal term) but not less than one years' salary and target bonus. (e) Any termination under this Section or termination of Employee's duties under Sections 1 and 2 of this Agreement, whether by the Employee or by the Company, shall be communicated by a notice of termination to the other party hereto, which shall set forth the facts and circumstances respecting such termination; provided, however, that no notice of termination -------- ------- ---- need be given in the event of the death of the Employee. (f) The Employee acknowledges and agrees that any termination under this Section is not intended, and shall not be deemed or construed, in any way to affect any of the Employee's covenants and obligations contained in Sections 7, 8, and 9 hereof, which shall continue in full force and effect. (g) In the event the Company exercises its right not to renew this Agreement pursuant to Section 1 or terminates the Employee's employment hereunder, other than pursuant to Sections 5(a), 5(b), 5(c) or 6(a), the Company shall pay to the Employee within thirty (30) days of termination (i) all Accrued Obligations and (ii) a lump sum amount equal to Employee's salary and target bonus for the remainder of the Employment Term (or renewal term) but not less than one years' salary and target bonus. Section 6. Change in Control-Termination of Employment and ----------------------------------------------- Compensation in Event of Termination. (a) After a Change in Control of the - ------------------------------------ Company (as such term is hereinafter defined) has occurred, if the Company (or any successor thereto) terminates the Employee's employment with the Company within one year after the Change in Control, the Employee (i) shall be entitled to his salary, bonuses, awards, perquisites and benefits, including, without limitation, benefits and awards under the Company's stock option plans and the Company's pension and retirement plans and programs, accrued through the date the Employee's employment with the Company is terminated (the "Termination Date") and, in addition, thereto, (ii) shall be entitled to be paid in a lump- sum, on the Termination Date, an amount of cash (to be computed, at the expense of the Company, by the partner of Deloitte & Touche, LLP, independent certified public accountants to the Company or such other independent certified accountants regularly employed by the Company (the "Accountants") in charge of the Company's account immediately prior to the Change in Control, whose computation shall be conclusive and binding upon the Employee and the Company) equal to 2.99 times Employee's "base amount" as defined in Section 280G(b)(3) of the Internal Revenue Code of 1986, as amended (the "Code"). Such lump-sum payment is hereinafter referred to as the "Termination Compensation." (b) For purposes hereof, a Change in Control shall be deemed to have occurred if there has occurred a change in control as the term "control" is defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended (the "Act"), as follows: (i) when any "person" (as such term is defined in Sections 3(a)(9) and 13(d)(3) of the Act, except for an employee stock ownership trust (or any of the trustees thereof), becomes a beneficial 5 owner, after the date hereof, directly or indirectly, of securities of the Company representing twenty (20%) percent or more of the Company's then outstanding common stock, no par value per share; (ii) if the stockholders of the Company approve a plan of complete liquidation of the Company; or (iii) if the stockholders of the Company approve an agreement for the sale or disposition of all or substantially all of the Company's assets. Notwithstanding the foregoing, no Change in Control shall be deemed to have occurred as a result of any event specified in clauses (i)-(iii) of this paragraph 4(b) if a majority of the Board of Directors approve such transaction prior to its occurrence. (c) Notwithstanding anything in this Agreement to the contrary, Employee shall have the right at his discretion to defer the Company's payment of all or part of the Termination Compensation to a subsequent year or years, provided that the Company shall not be required to pay the total Termination Compensation in more than five (5) payments. Employee shall provide written notice to the Company of any such deferral election in accordance with Section 11 of this Agreement. (d) It is intended that the "present value" of the payments and benefits to Employee, whether under this agreement or otherwise, which are includable in the computation of "parachute payments" shall not, in the aggregate, exceed 2.99 times the "base amount" (the terms "present value," "parachute payments" and "base amount" being determined in accordance with Section 280G of the Code). Accordingly, if Employee receives payments or benefits from the Company prior to payment of the Termination Compensation which, when added to the Termination Compensation, would, in the opinion of the Accountants, subject any of the payments or benefits to Employee to the excise tax imposed by Section 4999 of the Code, the Termination Compensation shall be reduced by the smallest amount necessary, in the opinion of the Accountants, to avoid such tax. In addition, the Company shall have no obligation to make any payment or provide any benefit to Employee subsequent to payment of the Termination Compensation which, in the opinion of the Accountants, would subject any of the payments or benefits to Employee to the excise tax imposed by Section 4999 of the Code. No reduction in Termination Compensation or release of the Company from any payment or benefit obligation in reliance upon any aforesaid opinion of the Accountants shall be permitted unless the Company shall have provided to Employee a copy of any such opinion, specifically entitling Employee to rely thereon, no later than the date otherwise required for payment of the Termination Compensation or any such later payment or benefit. Section 7. Restrictions Respecting Confidential Information. (a) The ------------------------------------------------ Employee has entered into the covenants and agreements contained in this Section 7 (i) in recognition of the competitive and confidential nature of the assets, properties, information and business of the Company, and (ii) in consideration of the compensation described in this Agreement. (b) The Employee hereby covenants and agrees that, during the Employment Term and thereafter, the Employee will not, and will not cause, suffer or permit any family member living within his household or other affiliate of the Employee to, directly or indirectly, under any circumstance: (i) disclose in any way any Confidential Information (as hereinafter defined) to any other person; (ii) act or fail to act so as to reveal any Confidential 6 Information or otherwise impair the confidential or proprietary nature of any Confidential Information; (iii) use any customer list, or other Confidential Information other than at the direction and for the benefit of the Company; or (iv) offer or agree to, or cause or assist in the inception or continuation of, any such disclosure, impairment or use. For the purposes of the foregoing, "Confidential Information" shall mean any and all information pertaining to the assets, business, creditors, vendors, manufacturers, customers, data, employees, financial condition or affairs, formulae, methods, operations, procedures, reports, suppliers, systems and technologies of the Company, including (without limitation) the contracts, patents, trade secrets and customer lists developed or otherwise acquired by the Company during the Employment Term; provided, however, that Confidential Information shall exclude -------- ------- ---- any information that is or becomes publicly available other than through disclosure (A) by the Employee or any of his family members or (B) by the Company, or any of its directors, officers, employees, consultants, agents or other representatives or affiliates. All Confidential Information is and will remain the sole and exclusive property of the Company. Following the Employment Term, the Employee shall exercise reasonable efforts to return all documents and other tangible items containing Confidential Information to the Company, without retaining any copies, notes or excerpts thereof, or to destroy such documents and items, as the Company may request. (c) Notwithstanding anything to the contrary in this Agreement, the terms and provisions of this Section and Sections 8 through 18 of this Agreement, together with any definitions used in such terms and provisions, shall survive the termination or expiration of the Employee's employment under Sections 1 and 2 hereof, irrespective of (i) the reason therefor, and (ii) whether such termination was permitted hereunder or under applicable law and the Company will have the right to communicate with any future or prospective employer concerning Employee's continuing obligations under this Agreement. Section 8. Enforcement, Etc. The Company, in its sole discretion, ---------------- may proceed to exercise or enforce any right, power, privilege, remedy or interest that the Company may have under this Agreement or applicable law: at law, in equity, in rem or in any other forum available under applicable law; without notice except as otherwise expressly provided herein; without pursuing, exhausting or otherwise exercising or enforcement any other right, power, privilege, remedy or interest that the Company may have against or in respect of the Employee or any other person or thing; and without regard to any act or omission of the Company or any other person. The Company may institute one or more proceedings (which may be separate proceedings) with respect to this Agreement in such order and at such times as the Company may elect in its sole and absolute discretion. Section 9. Equitable Relief. The Employee acknowledges and agrees ---------------- that it will be impossible to measure in money the damage to the Company in the event of a breach of any of the terms and provisions of Section 7 of this Agreement, and that, in the event of any such breach, the Company will not have an adequate remedy at law, although the foregoing shall not constitute a waiver of any of the Company's rights, powers, privileges and remedies against or in respect of a breaching party or any other person or thing under this Agreement, or applicable law. It is therefore agreed that the Company, in addition to all other such rights, powers, privileges and remedies that it may have, shall be entitled to injunctive relief, specific performance or such other equitable relief as the Company may request to exercise or otherwise enforce any of those terms and provisions and to enjoin or otherwise restrain any act prohibited 7 thereby, and the Employee will not raise and hereby waives any objection or defense that there is an adequate remedy available at law. Section 10. Representations and Warranties of Employee. ------------------------------------------ (a) (i) In order to induce the Company to enter into this Agreement, the Employee represents and warrants to the Company that: (i) the execution and delivery of this Agreement by the Employee and the performance of his obligations hereunder will not violate or be in conflict with any fiduciary or other duty, instrument, agreement, document, arrangement or other understanding to which the Employee is a party or by which he is or may be bound or subject; and (ii) the Employee is not a party to any instrument, agreement, document, arrangement or other understanding with any person (other than the Company) requiring or restricting the use or disclosure of any confidential information or the provision of any employment, consulting or other services. (b) The Employee hereby agrees to indemnify and hold harmless the Company from and against any and all losses, costs, damages and expenses (including without limitation, its reasonably attorneys' fees) incurred or suffered by the Company resulting from any breach by the Employee of any of his representations or warranties set forth in Section 10(a) hereof. Section 11. Notice. Except as otherwise expressly provided, any ------ notice, request, demand or other communication permitted or required to be given hereunder shall be in writing, shall be sent by one of the following means to the addressee at the address set forth in the preamble to this Agreement (or at such other address as shall be designated hereunder by notice to the other party hereto, effective upon actual receipt) and shall be deemed conclusively to have been given: (i) on the first business day following the day timely deposited with Federal Express (or other equivalent national overnight courier) or United States Express Mail, with the cost of delivery prepaid or for the account of the sender; (ii) on the fifth business day following the day sent by certified or registered United States mail, postage prepaid and return receipt requested; or (iii) when otherwise actually received by the addressee on a business day (or on the next business day if received after the close of normal business hours or on any non-business day). If a certificate, signed notice or other signed item is expressly required by another provision of this Agreement, a manually signed original must be delivered by the party giving it; any other notice, request, demand or other communication also may be sent by telecopy, with the cost of transmission prepaid or for the account of the sender, and shall (except as otherwise specified in this Agreement) be deemed conclusively to have been given on the first business day following the day duly sent. Section 12. Section and Other Headings. The section and other -------------------------- headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. Section 13. Governing Law. This Agreement has been executed and ------------- delivered, and shall be governed by and construed in accordance with the applicable laws pertaining, in the State of California. Section 14. Severability. In the event that any term or provision of ------------ this Agreement shall be finally determined to be superseded, invalid, illegal or otherwise 8 unenforceable pursuant to applicable law by a governmental authority having jurisdiction and venue, that determination shall not impair or otherwise affect the validity, legality or enforceability, to the maximum extent permissible by law, (a) by or before that authority of the remaining terms and provisions of this Agreement, which shall be enforced as if the unenforceable term or provision were deleted, or (b) by or before any other authority of any of the terms and provisions of this Agreement. If any provision of Section 7 hereof is held to be unenforceable because of the scope or duration of any such provision, the parties agree that any court making such determination shall have the power to reduce the scope or duration of such provision, and said provision shall be enforceable in such reduced form. Section 15. Counterparts. This Agreement may be executed in two ------------ counterpart copies of the entire document or of signature pages to the document, each of which may be executed by one of the parties hereto, but all of which, when taken together, shall constitute a single agreement binding upon both of the parties hereto. Section 16. Successors and Assigns; Assignment. Whenever in this ---------------------------------- Agreement reference is made to any party, such reference shall be deemed to include the successors, assigns, heirs and legal representatives of such party, and, without limiting the generality of the foregoing, all representations, warranties, covenants and other agreements made by or on behalf of the Employee in this Agreement shall inure to the benefit of the successors and assigns of the Company; provided, however, that nothing herein shall be deemed to authorize -------- ------- ---- or permit the Employee to assign any of his rights or obligations under this Agreement to any other person (whether or not a family member or other affiliate of the Employee), and the Employee covenants and agrees that he shall not make any such assignment. Section 17. Modification, Amendment, Etc. Each and every ---------------------------- modification and amendment of this Agreement shall be in writing and signed by all of the parties hereto, and each and every waiver of, or consent to any departure from, any representation, warranty, covenant or other term or provision of this Agreement shall be in writing and signed by each affected party hereto. Section 18. Entire Agreement. This Agreement contains the entire ---------------- agreement of the parties and supersedes all other representations, warranties, agreements and understandings, oral or otherwise, among the parties with respect to the matters contained herein. In Witness Whereof, the parties hereto have executed and delivered this Agreement as of the date first above written. Employee Name: Brian A. Seigel Rockford Industries, Inc. Name: ________________________ Title: _______________________ 9 EX-10.38 4 EMPLOYMENT AGREEMENT EXHIBIT 10.38 EMPLOYMENT AGREEMENT -------------------- This Employment Agreement (as the same may be supplemented, modified, amended or restated from time to time in the manner provided herein, this "Agreement") dated as of _______________, 1998, between Larry Hartmann, an individual residing at 507 Old Post Road, Wyckoff, New Jersey 07481 (the "Employee"), and Rockford Industries, Inc., a California corporation (the "Company") with principal offices at 1851 East First Street, Suite 600, Santa Ana, CA 92705. WHEREAS, the Company desires to employ the Employee, and the Employee desires to be employed by the Company, all upon the terms and provisions and subject to the conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: Section 1. Employment and Term. The Company hereby employs the ------------------- Employee as Executive Vice President of Sales of the Company and the Employee hereby accepts such employment, upon the terms and provisions and subject to the conditions set forth below for a term commencing on January 1, 1998 (the "Commencement Date") and terminating on the third anniversary of the Commencement Date, unless sooner terminated as herein provided (the "Employment Term"). This Agreement shall be automatically renewed for successive three (3) year terms after the expiration of the Employment Term and each subsequent renewal term, unless one party or the other gives notice, in writing, at least sixty (60) days prior to the expiration of the Employment Term or renewal term of their desire to terminate the Agreement or modify its terms. Section 2. Employee's Duties. (a) The Employee shall perform all ----------------- duties and services incident to and not inconsistent with Employee's positions with the Company, including, but not limited to, those duties as are assigned to such offices in the Company's by-laws and such other duties as may from time to time be assigned to him by the Board of Directors of the Company, or otherwise, subject in all cases to the authority and supervision of the Board of Directors of the Company and such limitations as from time to time may be imposed by it. (b) Employee agrees to abide by all policies of the Company promulgated from time to time by the Company. (c) Except for such business travels as may be incident to his duties hereunder, the Employee shall perform his duties at the Company's offices at the address set forth in the preamble to this Agreement or at such other location within 15 miles of such address. (d) The Employee shall devote all of his time (during regular business hours), effort and attention to the business and affairs of the Company and to the furtherance of the interests of the business of the Company. The Employee shall diligently and faithfully perform his duties and services hereunder to the best of his ability and with the highest of professional standards and integrity. The Employee will not, directly or indirectly, engage in any other business or enterprise requiring his personal time or attention, other than: (i) at the direction and for the benefit of the Company; (ii) to the extent approved in writing by the Company; or (iii) personal investments in securities. Section 3. Compensation for Employee's Services. (a) For the full, ------------------------------------ prompt and faithful performance of all of the duties and services to be performed by the Employee pursuant to Sections 1 and 2 hereof, the Company agrees to pay, and the Employee agrees to accept, during the first year of the Employment Term an annual base salary (the "Salary") equal to $236,250, less all necessary and required federal, state and local payroll deductions, payable in accordance with the usual payroll practices of the Company. For each successive year during the Employment Term (and any renewal term), Employee's Salary shall be increased by the greater of (1) five percent (5%) or (ii) the percentage increase in the Consumer Price Index for the previous calendar year. (b) In addition to the Salary, each year during the Employment Term (and any renewal term) Employee shall be eligible to receive a bonus pursuant to the terms and conditions of each Annual Bonus Plan established by the Company's Board of Directors. The target for each annual bonus shall be twenty-five percent (25%) of Employee's Salary. The specific criteria and levels in each Annual Bonus Plan shall be established in the discretion of the Board of Directors but will include consideration for Company performance, including earnings per share and originations, and Employee's individual performance. The Board of Director's shall communicate the terms of the Annual Bonus Plan to Employee on or before January 31st each year during the Employment Term (and any renewal term). (c) For each calendar year during the Employment Term (and any renewal term), Employee shall be entitled to paid vacation according to the following schedule: YEARS OF SERVICE WITH COMPANY VACATION Less than 10 years 4 weeks More than 10 years 5 weeks The Employee shall take such vacation at such time or times as shall be mutually agreed upon with the Company. The maximum amount of vacation time that Employee may have on the Company's books at any time shall be one year's vacation allotment. (d) During the Employment Term (and any renewal term), the Employee shall be entitled, at no cost to Employee, to such insurance and health and medical benefits as are from time to time in effect and are generally made available to other similar employees of the Company pursuant to the policies of the Company; provided, however, that the -------- ------- ---- 2 Employee shall be required to comply with the conditions attendant to coverage and shall comply with and be entitled to benefits only in accordance with the terms and conditions of such coverage. The Company may withhold from any benefits payable to the Employee all federal, state, local or other taxes and amounts as shall be permitted or required pursuant to law, rule or regulation. (e) During the Employment Term (and any renewal term), the Employee shall be eligible to participate in the pension, compensation and bonus plans or programs that from time to time are made available to other employees of the Company, subject to any applicable waiting periods, all in accordance with the terms and provisions of such plans or programs. (f) During the Employment Term (and any renewal term), the Company shall pay expenses up to $1,500.00 per month incurred by Employee in connection with the lease or ownership of an automobile to be used primarily for Company business and for all related expenses. (g) During the Employment Term (and any renewal term), the Company shall reimburse Employee up to $12,000.00 per year for the annual dues for membership in one (1) country club or other perquisites of equivalent monetary value, at the discretion of the Employee. (h) During the Employment Term (and any renewal term), the Company shall maintain a policy of life insurance for Employee in a face amount not less than two times Employee's then existing base salary. Employee shall designate, at his discretion, the beneficiary of such life insurance. Section 4. Expenses. The Employee shall be entitled to reimbursement -------- for his ordinary and necessary business expenses actually incurred during the Employment Term in the performance of his duties under Sections 1 and 2 of this Agreement, if and to the extent supported by such reasonable documentation as may be requested by the Company. Section 5. Termination of Employment Term. ------------------------------ (a) In the event of the death of the Employee during the term of his employment (or any renewal term), the Employee's employment shall terminate and this Agreement shall terminate on the date of such death; provided, however, that the Employee, his estate or legal representative, as the - -------- ------- ---- case may be, shall be entitled to receive, and the Company shall pay, any unpaid Salary and other benefits and reimbursable expenses accrued and owing to the Employee with respect to his employment prior to the termination. The sum of such amounts shall hereinafter be referred to as the "Accrued Obligations" which shall be paid to Employee's estate or beneficiary within thirty (30) days of the date of termination. 3 (b) If the Company determines in good faith that the Disability of Employee has occurred (pursuant to the definition of Disability set forth below), it may give to Employee written notice of its intention to terminate Employee's employment. In such event, Employee's employment with the Company shall terminate effective on the 30th day after receipt of such notice by Employee, provided that, within the 30 days after such receipt, Employee shall not have returned to full-time performance of his duties. For the purposes of this Agreement, "Disability" shall mean a physical or mental impairment which substantially limits a major life activity of Employee and which renders Employee unable to perform the essential functions of his position, even with reasonable accommodation which does not impose an undue hardship on the Company and which has lasted at least 120 consecutive days. In the event of termination of this Agreement on account of Employee's disability, within thirty (30) days of termination of this Agreement, the Company shall pay to Employee (i) all Accrued Obligations and (ii) a lump sum amount equal to one year of Employee's salary and his most recent bonus. In addition, the Company shall reimburse Employee for any payments made by him to the Company (or its insurance carrier) for the purpose of continuation of his medical and dental insurance under the provisions of the Consolidated Omnibus Reconciliation Act (COBRA). (c) The Company shall have the right to terminate the Employee's employment and to terminate this Agreement, in the event: (i) the Employee fails to substantially perform or repeatedly neglects his duties assigned in accordance with this Agreement in any continuing manner after notice from the Company of such failure or neglect; (ii) the Employee willfully fails or refuses to substantially follow or comply with the directions of the Board of Directors or of a superior officer or the policies or work rules of the Company; (iii) the Employee through his intentional action or inaction has subjected the Company to any criminal or civil liability under any applicable law; (iv) the Employee is indicted or convicted for any misdemeanor involving moral turpitude or any felony; (v) the Employee has used any narcotic or other illegal or controlled substance or abused or otherwise excessively used any alcoholic product or any prescription stimulant or depressant and such abuse or excessive use has interfered with Employee's performance of his duties hereunder; (vi) the Employee has misappropriated any asset or property of the Company, including (without limitation) any theft or embezzlement or any diversion of any corporate opportunity; (vii) the Employee has breached any of his covenants and agreements contained in this Agreement, including (without limitation) those contained in Section 7 hereof; or (viii) the Employee concealed or misrepresented any material fact in seeking employment hereunder. The Employee acknowledges and agrees that any of the foregoing reasons constitute adequate and sufficient cause for termination, and if the Company elects such termination, the Employee shall be entitled to receive only the Accrued Obligations (which, however, shall be subject to offset by the Company with respect to all amounts then owing to the Company by the Employee, including amounts respecting misappropriated assets and properties). (d) Employee shall have the right to terminate his employment and this Agreement by giving written notice of such termination within sixty (60) days of the occurrence of any of the following events: (i) The Company materially changes Employee's title, duties, scope of responsibility, or reporting relationship; or (ii) Employee is required to perform his principal duties at a location more than 25 miles from the Company's address set forth in the preamble to this Agreement. The purchase of the Company by another entity which 4 subsequently operates the Company as a wholly owned subsidiary shall not constitute a material change under clause (i) above so long as Employee's duties and scope of responsibilities within the Company are not materially changed. In the event of termination of this Agreement pursuant to this subsection, within thirty (30) days of termination of this Agreement, the Company shall pay to Employee (i) all Accrued Obligations and (ii) a lump sum amount equal to Employee's salary and target bonus for the remainder of the Employment Term (or renewal term) but not less than one years' salary and target bonus. (e) Any termination under this Section or termination of Employee's duties under Sections 1 and 2 of this Agreement, whether by the Employee or by the Company, shall be communicated by a notice of termination to the other party hereto, which shall set forth the facts and circumstances respecting such termination; provided, however, that no notice of termination -------- ------- ---- need be given in the event of the death of the Employee. (f) The Employee acknowledges and agrees that any termination under this Section is not intended, and shall not be deemed or construed, in any way to affect any of the Employee's covenants and obligations contained in Sections 7, 8, and 9 hereof, which shall continue in full force and effect. (g) In the event the Company exercises its right not to renew this Agreement pursuant to Section 1 or terminates the Employee's employment hereunder, other than pursuant to Sections 5(a), 5(b), 5(c) or 6(a), the Company shall pay to the Employee within thirty (30) days of termination (i) all Accrued Obligations and (ii) a lump sum amount equal to Employee's salary and target bonus for the remainder of the Employment Term (or renewal term) but not less than one years' salary and target bonus. Section 6. Change in Control-Termination of Employment and ----------------------------------------------- Compensation in Event of Termination. (a) After a Change in Control of the - ------------------------------------ Company (as such term is hereinafter defined) has occurred, if the Company (or any successor thereto) terminates the Employee's employment with the Company within one year after the Change in Control, the Employee (i) shall be entitled to his salary, bonuses, awards, perquisites and benefits, including, without limitation, benefits and awards under the Company's stock option plans and the Company's pension and retirement plans and programs, accrued through the date the Employee's employment with the Company is terminated (the "Termination Date") and, in addition, thereto, (ii) shall be entitled to be paid in a lump- sum, on the Termination Date, an amount of cash (to be computed, at the expense of the Company, by the partner of Deloitte & Touche, LLP, independent certified public accountants to the Company or such other independent certified accountants regularly employed by the Company (the "Accountants") in charge of the Company's account immediately prior to the Change in Control, whose computation shall be conclusive and binding upon the Employee and the Company) equal to 2.99 times Employee's "base amount" as defined in Section 280G(b)(3) of the Internal Revenue Code of 1986, as amended (the "Code"). Such lump-sum payment is hereinafter referred to as the "Termination Compensation." 5 (b) For purposes hereof, a Change in Control shall be deemed to have occurred if there has occurred a change in control as the term "control" is defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended (the "Act"), as follows: (i) when any "person" (as such term is defined in Sections 3(a)(9) and 13(d)(3) of the Act, except for an employee stock ownership trust (or any of the trustees thereof), becomes a beneficial owner, after the date hereof, directly or indirectly, of securities of the Company representing twenty (20%) percent or more of the Company's then outstanding common stock, no par value per share; (ii) if the stockholders of the Company approve a plan of complete liquidation of the Company; or (iii) if the stockholders of the Company approve an agreement for the sale or disposition of all or substantially all of the Company's assets. Notwithstanding the foregoing, no Change in Control shall be deemed to have occurred as a result of any event specified in clauses (i)-(iii) of this paragraph 4(b) if a majority of the Board of Directors approve such transaction prior to its occurrence. (c) Notwithstanding anything in this Agreement to the contrary, Employee shall have the right at his discretion to defer the Company's payment of all or part of the Termination Compensation to a subsequent year or years, provided that the Company shall not be required to pay the total Termination Compensation in more than five (5) payments. Employee shall provide written notice to the Company of any such deferral election in accordance with Section 11 of this Agreement. (d) It is intended that the "present value" of the payments and benefits to Employee, whether under this agreement or otherwise, which are includable in the computation of "parachute payments" shall not, in the aggregate, exceed 2.99 times the "base amount" (the terms "present value," "parachute payments" and "base amount" being determined in accordance with Section 280G of the Code). Accordingly, if Employee receives payments or benefits from the Company prior to payment of the Termination Compensation which, when added to the Termination Compensation, would, in the opinion of the Accountants, subject any of the payments or benefits to Employee to the excise tax imposed by Section 4999 of the Code, the Termination Compensation shall be reduced by the smallest amount necessary, in the opinion of the Accountants, to avoid such tax. In addition, the Company shall have no obligation to make any payment or provide any benefit to Employee subsequent to payment of the Termination Compensation which, in the opinion of the Accountants, would subject any of the payments or benefits to Employee to the excise tax imposed by Section 4999 of the Code. No reduction in Termination Compensation or release of the Company from any payment or benefit obligation in reliance upon any aforesaid opinion of the Accountants shall be permitted unless the Company shall have provided to Employee a copy of any such opinion, specifically entitling Employee to rely thereon, no later than the date otherwise required for payment of the Termination Compensation or any such later payment or benefit. Section 7. Restrictions Respecting Confidential Information. (a) The ------------------------------------------------ Employee has entered into the covenants and agreements contained in this Section 7 (i) in recognition of the competitive and confidential nature of the assets, properties, information and business of the Company, and (ii) in consideration of the compensation described in this Agreement. 6 (b) The Employee hereby covenants and agrees that, during the Employment Term and thereafter, the Employee will not, and will not cause, suffer or permit any family member living within his household or other affiliate of the Employee to, directly or indirectly, under any circumstance: (i) disclose in any way any Confidential Information (as hereinafter defined) to any other person; (ii) act or fail to act so as to reveal any Confidential Information or otherwise impair the confidential or proprietary nature of any Confidential Information; (iii) use any customer list, or other Confidential Information other than at the direction and for the benefit of the Company; or (iv) offer or agree to, or cause or assist in the inception or continuation of, any such disclosure, impairment or use. For the purposes of the foregoing, "Confidential Information" shall mean any and all information pertaining to the assets, business, creditors, vendors, manufacturers, customers, data, employees, financial condition or affairs, formulae, methods, operations, procedures, reports, suppliers, systems and technologies of the Company, including (without limitation) the contracts, patents, trade secrets and customer lists developed or otherwise acquired by the Company during the Employment Term; provided, -------- however, that Confidential Information shall exclude any information that is or - ------- ---- becomes publicly available other than through disclosure (A) by the Employee or any of his family members or (B) by the Company, or any of its directors, officers, employees, consultants, agents or other representatives or affiliates. All Confidential Information is and will remain the sole and exclusive property of the Company. Following the Employment Term, the Employee shall exercise reasonable efforts to return all documents and other tangible items containing Confidential Information to the Company, without retaining any copies, notes or excerpts thereof, or to destroy such documents and items, as the Company may request. (c) Notwithstanding anything to the contrary in this Agreement, the terms and provisions of this Section and Sections 8 through 18 of this Agreement, together with any definitions used in such terms and provisions, shall survive the termination or expiration of the Employee's employment under Sections 1 and 2 hereof, irrespective of (i) the reason therefor, and (ii) whether such termination was permitted hereunder or under applicable law and the Company will have the right to communicate with any future or prospective employer concerning Employee's continuing obligations under this Agreement. Section 8. Enforcement, Etc. The Company, in its sole discretion, ---------------- may proceed to exercise or enforce any right, power, privilege, remedy or interest that the Company may have under this Agreement or applicable law: at law, in equity, in rem or in any other forum available under applicable law; without notice except as otherwise expressly provided herein; without pursuing, exhausting or otherwise exercising or enforcement any other right, power, privilege, remedy or interest that the Company may have against or in respect of the Employee or any other person or thing; and without regard to any act or omission of the Company or any other person. The Company may institute one or more proceedings (which may be separate proceedings) with respect to this Agreement in such order and at such times as the Company may elect in its sole and absolute discretion. Section 9. Equitable Relief. The Employee acknowledges and agrees ---------------- that it will be impossible to measure in money the damage to the Company in the event of a breach of any of the terms and provisions of Section 7 of this Agreement, and that, in the event of any such breach, the Company will not have an adequate remedy at law, although the foregoing shall not 7 constitute a waiver of any of the Company's rights, powers, privileges and remedies against or in respect of a breaching party or any other person or thing under this Agreement, or applicable law. It is therefore agreed that the Company, in addition to all other such rights, powers, privileges and remedies that it may have, shall be entitled to injunctive relief, specific performance or such other equitable relief as the Company may request to exercise or otherwise enforce any of those terms and provisions and to enjoin or otherwise restrain any act prohibited thereby, and the Employee will not raise and hereby waives any objection or defense that there is an adequate remedy available at law. Section 10. Representations and Warranties of Employee. ------------------------------------------ (a) (i) In order to induce the Company to enter into this Agreement, the Employee represents and warrants to the Company that: (i) the execution and delivery of this Agreement by the Employee and the performance of his obligations hereunder will not violate or be in conflict with any fiduciary or other duty, instrument, agreement, document, arrangement or other understanding to which the Employee is a party or by which he is or may be bound or subject; and (ii) the Employee is not a party to any instrument, agreement, document, arrangement or other understanding with any person (other than the Company) requiring or restricting the use or disclosure of any confidential information or the provision of any employment, consulting or other services. (b) The Employee hereby agrees to indemnify and hold harmless the Company from and against any and all losses, costs, damages and expenses (including without limitation, its reasonably attorneys' fees) incurred or suffered by the Company resulting from any breach by the Employee of any of his representations or warranties set forth in Section 10(a) hereof. Section 11. Notice. Except as otherwise expressly provided, any ------ notice, request, demand or other communication permitted or required to be given hereunder shall be in writing, shall be sent by one of the following means to the addressee at the address set forth in the preamble to this Agreement (or at such other address as shall be designated hereunder by notice to the other party hereto, effective upon actual receipt) and shall be deemed conclusively to have been given: (i) on the first business day following the day timely deposited with Federal Express (or other equivalent national overnight courier) or United States Express Mail, with the cost of delivery prepaid or for the account of the sender; (ii) on the fifth business day following the day sent by certified or registered United States mail, postage prepaid and return receipt requested; or (iii) when otherwise actually received by the addressee on a business day (or on the next business day if received after the close of normal business hours or on any non-business day). If a certificate, signed notice or other signed item is expressly required by another provision of this Agreement, a manually signed original must be delivered by the party giving it; any other notice, request, demand or other communication also may be sent by telecopy, with the cost of transmission prepaid or for the account of the sender, and shall (except as otherwise specified in this Agreement) be deemed conclusively to have been given on the first business day following the day duly sent. 8 Section 12. Section and Other Headings. The section and other -------------------------- headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. Section 13. Governing Law. This Agreement has been executed and ------------- delivered, and shall be governed by and construed in accordance with the applicable laws pertaining, in the State of California. Section 14. Severability. In the event that any term or provision of ------------ this Agreement shall be finally determined to be superseded, invalid, illegal or otherwise unenforceable pursuant to applicable law by a governmental authority having jurisdiction and venue, that determination shall not impair or otherwise affect the validity, legality or enforceability, to the maximum extent permissible by law, (a) by or before that authority of the remaining terms and provisions of this Agreement, which shall be enforced as if the unenforceable term or provision were deleted, or (b) by or before any other authority of any of the terms and provisions of this Agreement. If any provision of Section 7 hereof is held to be unenforceable because of the scope or duration of any such provision, the parties agree that any court making such determination shall have the power to reduce the scope or duration of such provision, and said provision shall be enforceable in such reduced form. Section 15. Counterparts. This Agreement may be executed in two ------------ counterpart copies of the entire document or of signature pages to the document, each of which may be executed by one of the parties hereto, but all of which, when taken together, shall constitute a single agreement binding upon both of the parties hereto. Section 16. Successors and Assigns; Assignment. Whenever in this ---------------------------------- Agreement reference is made to any party, such reference shall be deemed to include the successors, assigns, heirs and legal representatives of such party, and, without limiting the generality of the foregoing, all representations, warranties, covenants and other agreements made by or on behalf of the Employee in this Agreement shall inure to the benefit of the successors and assigns of the Company; provided, however, that nothing herein shall be deemed to authorize -------- ------- ---- or permit the Employee to assign any of his rights or obligations under this Agreement to any other person (whether or not a family member or other affiliate of the Employee), and the Employee covenants and agrees that he shall not make any such assignment. Section 17. Modification, Amendment, Etc. Each and every ---------------------------- modification and amendment of this Agreement shall be in writing and signed by all of the parties hereto, and each and every waiver of, or consent to any departure from, any representation, warranty, covenant or other term or provision of this Agreement shall be in writing and signed by each affected party hereto. Section 18. Entire Agreement. This Agreement contains the entire ---------------- agreement of the parties and supersedes all other representations, warranties, agreements and understandings, oral or otherwise, among the parties with respect to the matters contained herein. In Witness Whereof, the parties hereto have executed and delivered this Agreement as of the date first above written. 9 Employee Name: Larry Hartmann Rockford Industries, Inc. Name: _____________________ Title: ____________________ 10 EX-10.39 5 CONSOLIDATED POOLING & SERVICING AGREEMENT EXHIBIT 10.39 ROCKFORD LIMITED I Seller, ROCKFORD INDUSTRIES, INC. Servicer, TEXAS COMMERCE BANK NATIONAL ASSOCIATION Trustee and Back-up Servicer, and SUNAMERICA LIFE INSURANCE COMPANY __________________________________________ AMENDED, RESTATED AND CONSOLIDATED POOLING AND SERVICING AGREEMENT Dated as of August 28, 1997 __________________________________________ TABLE OF CONTENTS
ARTICLE I DEFINITIONS Section 1.01 Definitions 2 Section 1.02 Other Definitional Provisions 23 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 24 Section 2.02 Acceptance by Trustee 27 Section 2.03 Lease Receivables; Repurchase; Substitution 27 Section 2.04 Releases 29 ARTICLE III ADMINISTRATION AND SERVICINGOF LEASES AND EQUIPMENT Section 3.01 Acceptance of Appointment; Duties of Servicer 30 Section 3.02 Collection of Payments 32 Section 3.03 Servicer Advances 33 Section 3.04 Realization Upon Defaulted Lease Contracts 33 Section 3.05 Security Deposits 33 Section 3.06 Representations and Warranties of Servicer 34 Section 3.07 Covenants of Servicer 36 Section 3.08 Servicing Compensation; Payment of Expenses by Servicer 38 Section 3.09 Monthly Statement; Annual Report 39 Section 3.10 Annual Statement as to Compliance; Notice of Default 39 Section 3.11 Annual Independent Public Accountants' Servicing Report 40 Section 3.12 Merger or Consolidation of, or Assumption of the Obligations of, Servicer 40 Section 3.13 Servicer Not To Resign 41 Section 3.14 Access to Certain Documentation and Information Regarding the Trust Assets 41 Section 3.15 No Offset 42 Section 3.16 Delivery of Backup Tapes to Back-up Servicer. 42 ARTICLE IV RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION AND APPLICATION OF COLLECTIONS Section 4.01 Rights of Certificateholders 42
Section 4.02 Establishment of Lockbox Account 42 Section 4.03 Establishment of Investment Account 43 Section 4.04 Establishment of the Certificate Accounts 44 Section 4.05 Letter of Credit; Cash Collateral Account 45 Section 4.06 Determination of Principal Amounts 47 Section 4.07 Determination of Interest Amounts 48 Section 4.08 Collections and Allocations; Required Deposits 49 Section 4.09 Account Agreements 51 Section 4.10 Payments under the Policy 51 Section 4.11 Investment of Monies Held in the Investment Account and the Cash Collateral Account 52 ARTICLE V DISTRIBUTIONS AND REPORTS TOCERTIFICATEHOLDERS Section 5.01 Distributions to Certificateholders 52 Section 5.02 Annual Certificateholders' Tax Statement 54 ARTICLE VI THE CERTIFICATES Section 6.01 The Certificates 54 Section 6.02 Authentication of Certificates 55 Section 6.03 Registration of Transfer and Exchange of Certificates 55 Section 6.04 Restrictions on Transfer of Certificates 56 Section 6.05 Mutilated, Destroyed, Lost or Stolen Certificates 56 Section 6.06 Persons Deemed Owners 57 Section 6.07 Appointment of Paying Agent 57 Section 6.08 Access to List of Certificateholders' Names and Addresses 58 Section 6.09 Authenticating Agent 58 Section 6.10 Non-Petition 59 Section 6.11 Private Offering and Transferability 59 ARTICLE VII MATTERS RELATING TO SELLER Section 7.01 Representations and Warranties Regarding Seller 60 ARTICLE VIII ADDITIONAL MATTERS RELATING TO SELLER Section 8.01 Covenants of Seller 64 Section 8.02 Indemnification of the Trust, Trustee, Bond Insurer, Back-up Servicer, Successor Servicer and Certificateholders 66 Section 8.03 Additional Obligations 66
Section 8.04 Servicer Reporting Requirements 70 Section 8.05 Annual Independent Public Accountant's Servicing Report; Annual Federal Tax Lien Search 72 Section 8.06 Filing 73 Section 8.07 Name Change or Relocation 74 Section 8.08 Chief Executive Office 74 Section 8.09 Costs and Expenses 74 ARTICLE IX SERVICER DEFAULTS Section 9.01 Servicer Defaults 74 Section 9.02 Back-up Servicer to Act; Appointment of Successor 77 Section 9.03 Notification to Certificateholders and Rating Agencies 78 Section 9.04 Waiver of Past Defaults 78 Section 9.05 Limitation 79 ARTICLE X THE TRUSTEE Section 10.01 Duties of Trustee 79 Section 10.02 Certain Matters Affecting Trustee 81 Section 10.03 Trustee Not Liable for Recitals in Certificates 82 Section 10.04 Rockford to Pay Certain of Trustee's Fees and Expenses. 83 Section 10.05 Eligibility Requirements for Trustee 83 Section 10.06 Resignation or Removal of Trustee 84 Section 10.07 Successor Trustee 84 Section 10.08 Merger or Consolidation of Trustee 85 Section 10.09 Appointment of Co-Trustee or Separate Trustee 85 Section 10.10 Tax Returns 87 Section 10.11 Trustee May Enforce Claims Without Possession of Certificates 87 Section 10.12 Suits for Enforcement 87 Section 10.13 Rights of the Controlling Party to Direct Trustee 87 Section 10.14 Representations and Warranties of Trustee 87 Section 10.15 Maintenance of Office or Agency 88 Section 10.16 Servicer Default 88 Section 10.17 Review of Lease Files 88 ARTICLE XI TERMINATION Section 11.01 Termination of Trust 89 Section 11.02 Optional Purchase 89 Section 11.03 Final Distribution 89
ARTICLE XII MISCELLANEOUS PROVISIONS Section 12.01 Amendment 90 Section 12.02 Protection of Right, Title and Interest to Trust Assets 91 Section 12.03 Limitation on Rights of Certificateholders 92 Section 12.04 Governing Law 93 Section 12.05 Notices 93 Section 12.06 Severability of Provisions 93 Section 12.07 Assignment 93 Section 12.08 Certificates Nonassessable and Fully Paid 93 Section 12.09 Further Assurances 94 Section 12.10 No Waiver; Cumulative Remedies 94 Section 12.11 Counterparts 94 Section 12.12 Third-Party Beneficiary 94 Section 12.13 Actions by Certificateholders. 94 Section 12.14 Intention of Parties 94 Section 12.15 Merger and Integration 95 Section 12.16 Headings 95 Section 12.17 Certificates and Opinions of Counsel 95 Section 12.18 Bond Insurer Default 96 Section 12.19 Non-Petition 96
EXHIBITS: Exhibit A: Form of Class A Certificate Exhibit B: Form of Class B Certificate 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 AMENDED, RESTATED AND CONSOLIDATED POOLING AND SERVICING AGREEMENT THIS AMENDED, RESTATED AND CONSOLIDATED POOLING AND SERVICING AGREEMENT, entered into and dated as of August 28, 1997 (as hereinafter amended and supplemented, this "Agreement"), is by and among ROCKFORD LIMITED I, a New --------- York corporation ("Seller"), as "Seller" hereunder, ROCKFORD INDUSTRIES, INC., a ------ California corporation ("Rockford" or "Servicer"), 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, and SUNAMERICA LIFE INSURANCE COMPANY, an Arizona corporation ("SunAmerica"). ---------- RECITALS Rockford, Trustee, SunAmerica and Seller (in its own capacity and as successor in interest to each of Seller's Predecessors through the merger thereof into Seller) are parties to each of the Existing Pooling and Servicing Agreements (as these and the other capitalized terms used and not otherwise defined in these Recitals are defined in Section 1.01 hereof), pursuant to ------------ which, among other things, the Existing Trusts were created, certain assets were transferred by Seller (and/or Seller's Predecessors) to one or more of the Existing Trusts, and the Existing Certificates evidencing ownership interests in the Existing Trusts were issued. Seller, Rockford, Trustee and SunAmerica have entered into this Agreement in order to continue, modify, combine, consolidate and restructure the Existing Pooling and Servicing Agreements and the Existing Certificates to: (a) reflect the addition of a surety bond issued by a "AAA" or "Aaa" rated monoline insurance company; (b) cause the Class A Certificates to be issued hereunder in exchange for (and in replacement of) the Existing Certificates (and all newly issued Class A Certificates to be issued hereunder) to receive a "AAA" or "Aaa" rating; (c) cause the Class B Certificates to be issued hereunder in replacement of the Existing Certificates (and all newly issued Class B Certificates to be issued hereunder) to receive at least a "BBB" rating by Duff & Phelps; (d) continue, combine, consolidate, modify (in various respects), add to and restate the representations, warranties, covenants and other obligations originally made in or created under the Existing Pooling and Servicing Agreements; and (e) combine, consolidate, amend, restate and completely replace the Existing Pooling and Servicing Agreements and the Existing Certificates, all upon the terms and provisions and subject to the conditions hereinafter set forth. Accordingly each of the Existing Pooling and Servicing Agreements and the Existing Certificates are each hereby modified, amended, combined, consolidated, restated, and replaced in their entirety in accordance with the following terms and conditions, effective as of the date hereof: "RECITALS Seller (on its own behalf and as successor in interest to each of Seller's Predecessors by reason of the merger thereof into Seller), Rockford, Trustee and Back-up Servicer are entering into this Agreement for the following purposes: (a) To effect the creation of the Trust by the name of "Rockford Lease Receivable Backed Trust 1997-A," and to effect the merger and consolidation of each of the Existing Trusts into the Trust. (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 (except as provided in and subject to Section 12.14 hereof) 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 Certificate Accounts and the Cash Collateral Account. "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 August 28, 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 fifteenth -------------- (15th)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 fourteenth (14th) day of the immediately following month. "Additional Servicing Fee" shall mean the reasonable servicing fee due ------------------------ the Successor Servicer and payable in accordance herewith to a Successor Servicer appointed pursuant to Section 9.02(a) that is in excess of the --------------- Servicing 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 all Lease Contracts constituting Trust Assets. "Aggregate Class A Credit Enhancement" shall have the meaning ------------------------------------ specified in Section 9.03(b). "Applicants" shall have the meaning specified in Section 6.08. ---------- ------------ "Application for Certificate of Title" shall mean: (a) with regard to ------------------------------------ each Vehicle owned by Seller for which a Certificate of Title has not been issued naming Seller as owner and Trustee as the first lienholder, evidence that an application for a Certificate of Title naming Seller as owner and Trustee as first lienholder has been submitted to the appropriate authority; and (b) with respect to each Vehicle in which Seller has a security interest, evidence that an application for a Certificate of Title or other notice of a vehicle lien necessary to perfect the Trust's lien in such Vehicle (whether originally or through assignment of such lien to Trustee by Rockford and/or Seller) has been submitted to the appropriate authority within 180 days of purchase by the Trust with respect to Certificates of Title originally issued in the name of Rockford. "Authorized Denominations" as related to the Class A Certificates and ------------------------ Class B 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 or Class B 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. "Blended Class B 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 B Certificates that have been issued and are outstanding. "Bond Insurer" shall mean Capital Markets Assurance Corporation, a New ------------ York stock insurance company, 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 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. "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 the Controlling Party 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). --------------- "Certificate" shall mean any one of the Class A Certificates or Class ----------- B certificates. "Certificate Accounts" shall mean the Class A Certificate Account and -------------------- the Class B Certificate Account. "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: (a) with regard to each Vehicle -------------------- originally owned by Rockford, the original certificate of title relating to such Vehicle, which shall name Seller as the owner of such Vehicle and Trustee as first lienholder; and (b) with respect to each Vehicle in which Rockford originally had a security interest, (i) for Vehicles titled in the States of Arizona, Kansas, Kentucky, Maryland, Michigan, Montana, New York, Oklahoma, Wisconsin or Wyoming (collectively, the "Notice States"), an ------------- original notice of lien evidencing that Trustee has been named as first lienholder of record with respect to such Vehicle, whether originally or through assignment of such lien to Trustee by Rockford and/or Seller, or (ii) for Vehicles titled in other than one of the Notice States, the original certificate of title relating to such Vehicle, which shall name Trustee as first lienholder, whether originally or through assignment of such lien to Trustee by Rockford and/or Seller. "Certificate Rate" shall mean with respect to each Class A Certificate ---------------- and Class B 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 Trustee -------------------- pursuant to Section 6.03, providing for the registration of the ------------ Certificates and transfers and exchanges thereof. "Class A Certificate" shall mean any one of the Fixed Rate Lease ------------------- Receivables-Backed Senior Certificates authenticated by 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)(vii), 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 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)(viii). --------------------- "Class B Certificate" shall mean any one of the Fixed Rate Lease ------------------- Receivables-Backed Senior Certificates authenticated by Trustee and substantially in the form attached hereto as Exhibit "B". ------------ "Class B Certificate Account" shall mean the account designated as --------------------------- such, established and maintained pursuant to Section 4.04(b). --------------- "Class B Certificate Distributable Amount" shall mean, for any Payment ---------------------------------------- Date, an amount equal to the sum, without duplication, of the Class B Certificate Interest Distributable Amount, the Class B Certificate Interest Shortfall Carryover, the Class B Certificate Principal Distributable Amount and the Class B Certificate Principal Shortfall Carryover. "Class B Certificate Interest Distributable Amount" shall have the ------------------------------------------------- meaning specified in Section 4.07(b). --------------- "Class B 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 B Certificate Interest Distributable Amount for such Payment Date plus any outstanding Class B 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 B Certificate Account on the related Deposit Date pursuant to Section 4.08(b)(x), plus ------------------ (b) interest on such excess, to the extent permitted by law, at the Blended Class B Interest Shortfall Rate from such Payment Date through the immediately succeeding Payment Date. "Class B Certificate Investor Interest" shall mean, as of any Payment ------------------------------------- Date, an amount equal to the Initial Class B Certificate Investor Interest, minus the aggregate amount of payments of principal distributed to the ----- Holders of Class B Certificates pursuant to Section 5.01 on or prior to ------------- such Payment Date. "Class B Certificate Principal Distributable Amount" shall have the -------------------------------------------------- meaning specified in Section 4.06(b). --------------- "Class B Certificate Principal Shortfall Carryover" shall mean, as of ------------------------------------------------- the close of business on any Payment Date, the excess of (a) the Class B Certificate Principal Distributable Amount for such Payment Date plus any outstanding Class B 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 B Certificate Account on the related Deposit Date pursuant to Section 4.08(b)(xi). ------------------- "Closing Date" shall mean the Initial Closing Date and each Subsequent ------------ Closing Date, as the context requires. "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. "Consolidated Certificates" shall have the meaning specified in ------------------------- Section 2.01(h). - --------------- "Consolidated Class A Certificate Investor Interest" shall mean, as of -------------------------------------------------- any date of determination, that portion of the Class A Certificate Investor Interest relating to the Consolidated Certificates, as reflected on the books and records of Servicer. "Consolidated Class B Certificate Investor Interest" shall mean, as of -------------------------------------------------- any date of determination, that portion of the Class B Certificate Investor Interest relating to the Consolidated Certificates, as reflected on the books and records of Servicer. "Controlling Party" shall mean, as of any date of determination: (a) ----------------- Bond Insurer, so long as (i) any amounts are owed hereunder to the holders of the Class A Certificates, (ii) the Policy remains in full force and effect, and (iii) no Bond Insurer Default shall have occurred and be continuing; or (b) the Majority Certificateholders, (i) so long as any Bond Insurer Default has occurred and is continuing, or (ii) if the Policy has expired or has been terminated, or the Policy is otherwise no longer in effect, or (iii) if there are no other amounts owed hereunder to the holders of the Class A Certificates. "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 600 Travis, 8th Floor, Houston, Texas 77002, Attention: Global Trust Services -- Rockford 1997-A. "Cut-Off Date" shall mean (i) with respect to the Initial Closing ------------ Date, the Initial Cut-Off Date, 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, however, that each Lease -------- ------- Contract as to which the Lessee thereunder is delinquent in any portion of the Scheduled Payments for a period of 91 days or more shall automatically be deemed a Defaulted Lease Contract. "Delinquent Lease Contract" shall mean a Lease Contract as to which ------------------------- the Lessee thereunder is delinquent in any portion of the Scheduled Payments for a period of more than 30 days but less than 61 days. "Deposit Date" shall mean, with respect to each Collection Period, the ------------ Business Day immediately preceding the related Payment Date. "Default Charge-off Ratio" shall mean, a fraction (expressed as a ------------------------ percentage, determined as of the last day of any Collection Period) equal to (a) four (4), times (b) the aggregate outstanding Discounted Lease ----- Contract Balance of all Lease Contracts that first became Defaulted Lease Contracts during such Collection Period and during each of the preceding two Collection Periods net of related Recoveries, divided by (c) the sum of ---------- the Discounted Lease Contract Balances of all Lease Contracts as of the last day of such Collection Period and each of the two preceding Collection Periods, divided by (d) three (3); provided, however, that in making such ---------- -------- ------- determination, the Discounted Lease Contract Balance of all of the Defaulted Lease Contracts described in clause (b) hereof shall be determined without giving effect to the proviso in the definition of "Discounted Lease Contract Balance." "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 Contract 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, Early Termination Lease Contract or Expired Lease Contract at such time shall be deemed to be equal to zero. "Discount Pool Rate" shall mean as to all Lease Contracts purchased by ------------------ the Trust on a particular Closing Date, (i) the sum (for all Certificates issued on such Closing Date) of the products of (x) the original principal amount of each Certificate issued on such Closing Date, multiplied by (y) ---------- the Certificate Rate for such Certificate, with such sum being divided by the aggregate principal amount of all Certificates issued on such Closing Date, plus (ii) 0.545% (such percentage being the sum of the Servicing Fee 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). -------------- -------------- "Duff & Phelps" shall mean shall mean Duff & Phelps Credit Rating Co. ------------- "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 AAA by Standard & Poor's and Aaa by Moody's, or (b) a federal or state chartered depository institution with accounts subject to 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) obligations fully guaranteed by the United States of America, including, but not limited to, depository receipts issued by a bank as custodian with respect to any such instrument or security held by the custodian for the benefit of the holder of such depository receipt; (ii) demand deposits or time deposits in, 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 or Standard & Poor's of P-1 and A-1+, respectively, or the long term unsecured debt obligations (other than such obligations whose rating is based on collateral or on the credit of a Person other than such institution or trust company) of such depository institution or trust company shall have a rating in the highest investment category from Moody's or Standard & Poor's, or (y) such time deposits are fully insured by the FDIC; (iii) certificates of deposit having, at the time of the Trust's investment or contractual commitment to invest therein, a rating from Moody's or Standard & Poor's of P-1 and A-1+, respectively; or (iv) investments in money market funds rated in the highest investment category by Moody's or Standard & Poor's at the time of the Trust's investment therein or otherwise approved in writing by each Rating Agency and the Controlling Party; (b) demand deposits in the name of the Trust or 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 or Standard & Poor's of P-1 and A-1+, respectively; (d) Eurodollar time deposits that are obligations of institutions whose time deposits carry a credit rating in the highest short-term rating category from Moody's or Standard & Poor's at the time of the Trust's investment therein; and (e) repurchase agreements involving any of the Eligible Investments described in clauses (a)(i), (a)(iii) and (d) hereof so long as the other party to the repurchase agreement has a rating in the highest short-term rating category from Moody's or Standard & Poor's at the time of the Trust's investment therein; and (f) any other investment approved in writing by the Controlling Party and each Rating Agency. Eligible Investments shall be held to maturity or shall otherwise be available for withdrawal which in each case shall occur on or prior to the date they are needed for payment. Eligible Investments may include, without limitation, those investments for which Trustee or an Affiliate of 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 Amended, -------------------------------------- Restated and Consolidated 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. "Existing Certificates" shall mean each of the "Certificates" issued --------------------- by the Existing Trusts as of the Initial Closing Date with respect to the Existing Trust Assets, under (and as defined in) each of the Existing Pooling and Servicing Agreements,. "Existing Pooling and Servicing Agreements" shall mean each of the ----------------------------------------- following agreements, as modified and supplemented as of the Initial Closing Date, but without giving effect to any of the modifications thereto provided in this Agreement: (a) the Pooling and Servicing Agreement dated as of January 31, 1995, among Seller, Servicer, Trustee and SunAmerica; (b) the Pooling and Servicing Agreement dated as of February 23, 1996 among Rockford Limited II, Servicer, Trustee and SunAmerica; (c) the Pooling and Servicing Agreement dated as of June 28, 1996 among Rockford Limited II-B, Servicer, Trustee and SunAmerica; (d) the Pooling and Servicing Agreement dated as of September 27, 1996 Rockford Limited II-C, Servicer, Trustee and SunAmerica; among and (e) the Pooling and Servicing Agreement dated as of February 7, 1997 among Rockford Limited II-D, Servicer, Trustee and SunAmerica. "Existing Post Office Lockbox" shall have the meaning specified in ---------------------------- Section 4.02. - ------------ "Existing Trust Assets" shall mean all of the "Trust Assets" owned by --------------------- or otherwise transferred to the Existing Trusts as of the Initial Closing Date under (and as defined in) each of the Existing Pooling and Servicing Agreements. "Existing Trusts" shall mean the following trusts formed under (and in --------------- accordance with the terms of) one of the Existing Pooling and Servicing Agreements: (a) Rockford Limited I Trust 1995-A; (b) Rockford Limited II Trust 1996-A; (c) Rockford Limited II Trust 1996-B; (d) Rockford Limited II Trust 1996-C; and (e) Rockford Limited II Trust 1996-D. "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. "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. "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 subsidiary or other Affiliate thereof, or (2) a member of the immediate family of any person described in clause (A)(1) hereof, and (B) does not then directly or indirectly own any class of voting capital stock of Seller or any of its Affiliates; provided, however, -------- ------- that, notwithstanding the foregoing, an Independent Director may be, or within the prior five (5) years may have been, an independent director of any one or more special purpose corporate subsidiaries of Rockford. "Independent Public Accountants" means Deloitte & Touche or any other ------------------------------ any nationally recognized certified public accounting firm; provided, -------- however, that such other firm is independent with respect to Servicer ------- (within the meaning of the Securities Act) and is reasonably acceptable to the Controlling Party. "Initial Aggregate Certificate Principal Balance" shall mean as of any ----------------------------------------------- date, the aggregate original principal balance of all Certificates issued on or prior to such date. "Initial Class A Certificate Investor Interest" shall mean on any ---------------------------------------------- date, the aggregate original principal balance of all Class A Certificates issued on or prior to such date. "Initial Class B Certificate Investor Interest" shall mean on any --------------------------------------------- date, the aggregate original principal balance of all Class B Certificates issued on or prior to such date. "Initial Closing Date" shall mean the date of this Agreement. --------------------- "Initial Cut-Off Date" shall mean July 31, 1997. -------------------- "Initial Payment Date" shall mean September 15, 1997. -------------------- "Insurance Agreement" shall mean the Insurance and Reimbursement ------------------- Agreement, dated as of August 28, 1997, by and among Bond Insurer, Seller, Rockford, SunAmerica, 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 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. "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, ----------------- without duplication, 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 the Sale Assignment delivered on the Initial Closing Date and to each other 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 the Controlling Party) 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 August 28, 1997 between Letter of Credit Bank and Rockford (or any replacement therefor satisfactory to the Controlling Party). "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. "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 all of the following ---------------------------- Certificateholders: (a) the Holders of Class A Certificates aggregating not less than 51% of the Class A Certificate Investor Interest, and (b) the Holders of Class B Certificates aggregating not less than 51% of the Class B Certificate Investor Interest. "Minimum Available Amount" shall mean an Available Amount equal to ------------------------- (i) the sum of (a) 6.25 % of the sum of (1) the Consolidated Class A Certificate Investor Interest, plus (2) the Consolidated Class B ---- Certificate Investor Interest, plus (b) 7.25% of the sum of (1) the ---- difference between (A) the Class A Certificate Investor Interest, minus (B) ----- the Consolidated Class A Certificate Investor Interest, plus (2) the ---- difference between (A) the Class B Certificate Investor Interest, minus (B) ----- the Consolidated Class B Certificate Investor Interest. "Minimum LOC Amount" shall mean, as of any date of determination, the ------------------ greatest of: (i) the sum of (a) 7.00 % of the sum of (1) the Consolidated Class A Certificate Investor Interest, plus (2) the Consolidated Class B ---- Certificate Investor Interest, plus (b) 8.00% of the sum of (1) the ---- difference between (A) the Class A Certificate Investor Interest, minus (B) ----- the Consolidated Class A Certificate Investor Interest, plus (2) the ---- difference between (A) the Class B Certificate Investor Interest, minus (B) ----- the Consolidated Class B Certificate Investor Interest; (ii) the lesser of (a) 5% of the highest Class A Certificate Investor Interest as of any prior Closing Date, and (b) $3,500,000.00; and (iii) the Aggregate Discounted Lease Contract Balance of the Lease Contracts relating to the Lessees having the three (3) highest total Discounted Lease Contract Balances, provided, however, that, in the event of a Servicer Default, the Minimum LOC Amount shall be equal to the Minimum LOC Amount in effect as of the date of determination immediately preceding the occurrence of such Servicer Default. "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 Moody's Investor Service, Inc. and any successor ------- thereof. "Net Worth Requirement" shall mean the requirement that with respect ---------------------- to Servicer, as of the end of any fiscal quarter thereof: (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 its 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, is equal to at least the sum of (i) $18,000,000, plus (ii) 50% of the ---- cumulative after tax net income since December 31, 1996 of Servicer and its Affiliates. "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 the Controlling Party. "Opinion of Counsel" shall mean a written opinion of outside counsel ------------------ which shall be reasonably satisfactory to Trustee and the Controlling Party in form and substance acceptable to Trustee and the Controlling Party. "Optional Purchase Amount" shall have the meaning specified in Section ------------------------ ------- 11.02. ------ "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 ------------ fifteenth (15th) 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 ------ "Surety Bond" issued by Bond Insurer under (and as defined in) the Insurance Agreement, insuring the Class A Certificates in accordance with the terms thereof. "Post Office Lockbox" shall have the meaning specified in Section ------------------- ------- 4.02. ----- "Pre-Default Contract" shall mean a Lease Contract as to which the --------------------- Lessee thereunder is delinquent in any portion of the Scheduled Payments for a period of more than 60 days but less than 91 days. "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 Fee" shall mean, as of the date of determination thereof, -------------- with respect to any Lease Contract subject to a Prepayment, a sum equal to the product of (a) 0.50%, multiplied by (b) the Discounted Lease ---------- Contract Balance of such Lease Contract as of such date. "Principal Agreements" shall mean this Agreement, the Equipment and -------------------- Lease Purchase Agreement, the Insurance Agreement, the Purchase Agreement, each Sale Assignment, the Capital Contribution Agreement, the Letter of Credit Reimbursement Agreement and the Lockbox Agreement. "Purchase Agreement" shall mean the Purchase Agreement dated as of ------------------ date hereof, by and among Seller, Rockford, Trustee and SunAmerica. "Purchase Amount" shall mean either the Warranty Purchase Amount or --------------- the Optional Purchase Amount, as applicable. "Rating Agencies" shall mean each of Duff & Phelps, 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. "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 Limited I, a New York corporation, in its ------ own capacity and as successor in interest to each of Seller's Predecessors. "Seller's Predecessors" shall mean Rockford Limited II, Rockford --------------------- Limited II-B, Rockford Limited II-C and Rockford Limited II-D, each of which was a New York corporation that was merged into Seller prior to the date hereof. "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 ---------------- Servicer pursuant to Section 3.03. ------------ "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 the Controlling Party by Servicer, as such list may from time to time be amended. "Servicing Procedures" shall mean the servicing procedures of Servicer -------------------- set forth on Schedule 3.01(b) hereto. ---------------- "Standard & Poor's" shall mean Standard and Poor's Ratings Services, a ----------------- division of The McGraw-Hill Companies, Inc., and any successor thereof. "Stated Maturity" shall mean the Payment Date in the Collection Period --------------- which is 180 days following the Collection Period in which the final Scheduled Payment is due with respect to the Lease Contract having the latest Scheduled Expiration Date of all Lease Contracts which constitute Trust Assets. "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 types of Leases represented in the pool of Lease Contracts previously pledged to 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 substantially equal to (but not greater than) the remaining term of the Lease Contract being withdrawn. "Successor Servicer" shall have the meaning specified in Section 9.02. ------------------ ------------ "Successor Servicer Fee" shall mean the amount of the Additional ---------------------- Servicing Fee and any other reimbursement of reasonable out-of-pocket expenses, including Liquidation Expenses, incurred by a Successor Servicer in connection with realization on the Lease Contracts or other enforcement procedures in respect of Collections (including, without limitation, repossessions, freight, skip tracing, telecommunications, accounting fees, legal fees, taxes, etc.). "SunAmerica" shall mean SunAmerica Life Insurance Company, an Arizona ----------- corporation. "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, Back-up Servicer, Trustee, Bond Insurer or any Certificateholder, in connection with a transfer of servicing from Servicer to a Successor Servicer as Successor Servicer pursuant to Section 9.02, but not to exceed ------------ $50,000.00 in the aggregate; provided, however, that such $50,000.00 -------- ------- limitation shall not apply if Rockford is terminated as Servicer hereunder due to the occurrence of a Servicer Default arising from Rockford's gross negligence or willful misconduct. "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 Receivables Backed Trust 1997-A," together with each of the Existing Trusts, after giving effect to the merger of such trusts in accordance with Section 2.01(b) hereof. --------------- "Trust Assets" shall mean (a) all of the Existing Trust Assets, (b)all ------------ of the other 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, (c) all of the security interests granted to Trustee hereunder in respect of the Equipment and other Trust Assets, (d) the Letter of Credit, and (e) all of the 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) 91 ---------------------- days after the date on which all Trust Assets have been distributed pursuant to this Agreement, and (b) 91 days after the day after the date on which (i) the Class A Certificate Investor Interest and the Class B Certificate Investor Interest is first reduced to zero, and (ii) 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 0.02% 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. Such Trustee Fee shall also include those fees and expenses required to be paid and not paid by Rockford pursuant to Section 10.04. "UCC" shall mean the Uniform Commercial Code, as amended from time to --- time, as in effect in the relevant jurisdiction. "Vehicle" shall mean a commercial motor vehicle which is the subject ------- of a Lease Contract. "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. 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, the Certificateholders 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) Each of the Existing Trusts are hereby merged with and into the Trust, effective as of the Initial Closing Date, and the separate existence of each of the Existing Trusts shall thereupon cease, and the Trust shall be the sole surviving trust in such merger and shall be sole and exclusive owner of all of the Existing Trust Assets in accordance with the terms and conditions of this Agreement. (c) Effective as of each Closing Date, Seller shall have transferred, assigned, set over and otherwise conveyed (or, with respect to the Existing Trust Assets on the Initial Closing Date, reconfirmed the prior transfer, assignment, setting over and conveyance) 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 the related 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 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 (and by these presents does hereby 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 the Lease Contracts constituting part of the Existing Trust Assets and each other 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 and subject to Section 12.14 hereof, ------------- 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 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 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. The Existing Certificates transferred and assigned to Seller in exchange for the Certificates to be issued on the Initial Closing Date (collectively, the "Consolidated Certificates") shall thereafter be ------------------------- deemed canceled, void and of no further force or effect. The Consolidated Certificates shall be issued by the Trust in order to amend, consolidate and completely restate, and to evidence the indebtedness outstanding under and be a substitute and replacement for, the Existing Certificates, but shall not intended and shall not be deemed or construed to be a payment, satisfaction, cancellation or novation of any of the liabilities or obligations of the Trust or any of the Existing Trusts under the Existing Certificates. (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, the Controlling Party and SunAmerica. (j) The Certificateholders' security for payment of all amounts due and owing on the Certificates shall be limited to the Trust Assets and the Certificateholders shall have no recourse against any other Person, including but not limited to Servicer, Trustee or Seller. 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 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 at least 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 time Seller, the Controlling Party 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 the Controlling Party 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 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 the Controlling Party 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 at the request of the Lessee, Seller shall be entitled either (i) 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 Tuesday or Thursday next succeeding the date of such prepayment or early termination, whichever shall occur first (or if such Tuesday or Thursday is not a Business Day, on the Business Day immediately following such day), or (ii) to deliver a Substitute Lease Contract therefor meeting the Substitution Criteria; provided, however, that the cumulative Discounted Lease Contract -------- ------- Balance of all such Lease Contracts that are substituted for by Seller hereunder (measured as of the date of such substitution) shall not exceed 5.0 % of the Initial Aggregate Certificate Principal Balance (measured as of the date of such substitution); and provided, further, however, that the cumulative Discounted -------- ------- ------- Lease Contract Balance of all Delinquent Lease Contracts or Pre-Default Contracts that constitute prepaid or early-terminated Lease Contracts that are purchased or substituted for by Seller hereunder (measured as of the date of such purchase or substitution) shall not exceed 1.0 % of the Initial Aggregate Certificate Principal Balance (measured as of the date of such purchase or substitution). (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 the - --------------- Controlling Party the item listed in (i) below, and Seller shall provide to Trustee and the Controlling Party 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, however, that, in -------- ------- each case, Seller first delivers to Trustee and the Controlling Party 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 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 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 the Controlling Party 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. In addition, Servicer shall calculate and keep records of the current Consolidated Class A Certificate Investor Interest and the Consolidated Class B Certificate Investor Interest. 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 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 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 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 (i) shall not materially and adversely affect the interests of the Certificateholders or Bond Insurer, and (ii) shall be agreed to by Servicer in exchange for an additional guaranty, additional liability under an existing limited guaranty, additional collateral or some other improvement in the overall credit position and/or collateral position of such Lease Contract for the benefit of the Trust. Servicer shall not consent to any amendment to any Lease Contract 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, in any such case, would prevent the complete amortization of the Discounted Lease Contract Balance thereof from occurring later than three (3) months after its original stated term, or (b) would result in such Lease Contract, as so amended or supplemented, no longer being an Eligible Lease Contract; provided, however, that the cumulative Discounted Lease Contract -------- ------- Balance of the Lease Contracts with respect to which Servicer agrees to any such amendment shall not exceed 1% of the Initial Aggregate Certificate Principal Balance. 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 Back-up Servicer, the Controlling Party 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 on the Tuesday or Thursday next succeeding the date of such receipt, whichever shall occur first (or if such Tuesday or Thursday is not a Business Day, on the Business Day immediately following such day). 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. (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 (as such term is defined in the Purchase Agreement). 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 (but not a Back-up Servicer or Successor 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. 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. 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 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 material term of any material indenture, agreement, mortgage, deed of trust or other instrument to which Servicer is a party or by which it is bound, or result in the creation or imposition of any material Lien upon any of its material properties pursuant to the terms of any such material 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 material 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. (j) Financial Statements. The December 31, 1996 audited financial -------------------- statements of Servicer heretofore furnished to SunAmerica 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 SunAmerica 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) mark 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. (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. (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, the Certificateholders, 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 the Controlling Party. (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 the Controlling Party a certification evidencing coverage under such fidelity bond. Such fidelity bond shall not be canceled or modified in a materially adverse manner. 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 Trustee pursuant to Section 10.04, expenses incurred in connection with ------------- distributions and reports to Trustee and the Controlling Party, 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 the Controlling Party, 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, the Majority Certificateholders or any Rating Agency. In addition, Servicer shall provide to Back-up Servicer and the Controlling Party 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 Certificate Accounts during the preceding Collection Period if held by Trustee. (c) Annual Report; Audit. Servicer will provide to Trustee, the -------------------- Controlling Party 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 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 Trustee, the Controlling Party 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 has occurred, or, if such a Servicer Default 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 Accountants' Servicing Report. ------------------------------------------------------- On or before the first anniversary of the Initial Closing Date and, unless required more frequently by any Rating Agency or the Controlling Party after the occurrence of a Servicer Default, on each yearly anniversary thereafter, Servicer at its expense shall cause a firm of Independent Public Accountants to furnish a statement to Trustee, the Controlling Party, SunAmerica 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 Net Worth Requirement and shall expressly assume, by an agreement supplemental hereto, executed and delivered to Trustee in form satisfactory to Trustee and the Controlling Party, the performance of every covenant and obligation of Servicer hereunder; (b) immediately after giving effect to such transaction, no representation or warranty made by Servicer in any Principal Agreement shall have been breached; (c) Servicer has delivered to Trustee and the Controlling Party 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 the Controlling Party 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 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; (e) the Controlling Party has given its prior written consent (not to be unreasonably withheld); and (f) notice of such consolidation, merger, conveyance or transfer is given to each of the Rating Agencies. Servicer shall provide prior written notice of such event to the Rating Agencies and the Controlling Party. 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, the Controlling Party shall have the right, in its sole discretion, to modify the Servicer Defaults. 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 the - ---- Controlling Party. No Servicer resignation shall become effective until 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) 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. 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, the Controlling Party, 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, the ------------ Controlling Party, 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. Section 3.16 Delivery of Backup Tapes to Back-up Servicer. (a) Servicer -------------------------------------------- shall deliver to Back-up Servicer, or its designated agent, a computer diskette (or other electronic transmission) with the loan master file and history information on or prior to the Closing Date in the case of the Initial Cut-off Date, and on or prior to the related Subsequent Closing Date in the case of additional Lease Contracts, to enable Back-up Servicer to maintain records sufficient to assume the role of a Successor Servicer. (b) Servicer shall deliver the loan master file and history information to Back-up Servicer, or its agent, on or before the tenth (10th) day of each month, or as otherwise required by Bond Insurer or Back-up Servicer. ARTICLE IV RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION AND APPLICATION OF COLLECTIONS Section 4.01 Rights of Certificateholders. Except as provided in and ---------------------------- subject to Section 12.14 hereof, 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, however, that the aggregate interest -------- ------- represented by the Certificates at any time shall not exceed an amount equal to the Class A Certificate Investor Interest and Class B Certificate Investor Interest at such time, plus interest on such amounts calculated at the applicable Certificate Rate and (as applicable) as calculated at the Blended Class A Interest Shortfall Rate and the Blended Class B Interest Shortfall Rate (as provided in the definitions of "Class A Interest Shortfall Carryover" and the "Class B Interest Shortfall Carryover," respectively). 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 a lockbox agreement (the "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; provided, however, that such notice shall not be required to be sent to any - -------- ------- Lessee that was previously sent a notice to make such payments to a post office lockbox established under one of the Existing Pooling and Servicing Agreements (each, an "Existing Post Office Lockbox"); provided, further, that the Lockbox ---------------------------- -------- ------- Agreement requires the Lockbox Servicer to remit all payments received in any Existing Post Office Lockbox to be deposited into 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 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 Servicer, the Controlling Party 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 Trustee for the benefit of the Certificateholders and Bond Insurer. Servicer shall give prior written notice to the Controlling Party 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 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 the Controlling Party of (i) the establishment of a new Investment Account (such new Investment Account shall be maintained with an Eligible Institution) 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 30 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 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 writing by Servicer, that will mature or otherwise be available for withdrawal without penalty on each Deposit Date. Section 4.04 Establishment of the Certificate Accounts. ----------------------------------------- (a) Servicer, for the benefit of the Holders of the Class A Certificates 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 Holders of the Class A Certificates 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 Holders of the Class A Certificates 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 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) Servicer, for the benefit of the Holders of the Class B Certificates, 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 B Certificate Account"), bearing a designation clearly indicating that - ---------------------------- the funds deposited therein are held for the benefit of the Holders of the Class B Certificates. Trustee shall possess all right, title and interest in all funds on deposit from time to time in the Class B Certificate Account and in all proceeds thereof. The Class B Certificate Account shall be under the sole dominion and control of Trustee for the benefit of the Holders of the Class B Certificates. If, at any time, the institution holding the Class B 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 Trustee to transfer any such amounts to such new account and from the date such new account is established, it shall be the "Class B Certificate Account." (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 Trustee and the Controlling Party of (i) the establishment of a new Class A Certificate Account (such new Class A Certificate Account shall be maintained with an Eligible Institution) or (ii) a change in the location of the Class A Certificate Account. (d) Funds on deposit in the Class B Certificate Account shall remain uninvested. On the Initial Closing Date, the Class B Certificate Account shall be established with a New York office of Trustee. Servicer shall give prior written notice to Trustee and the Holders of the Class B Certificates of (i) the establishment of a new Class B Certificate Account (such new Class B Certificate Account shall be maintained with an Eligible Institution) or (ii) a change in the location of the Class B 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 (xi) for the -------------------------------- immediately following Deposit Date exceeds the amount which will be on deposit in the Investment Account on such Determination Date; provided, however, that -------- ------- 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 the Controlling Party 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 P.M. (New York 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 the Controlling Party, 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 the Controlling Party of (i) the establishment of a new Cash Collateral Account (such new Cash Collateral Account shall be maintained with an Eligible Institution) 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. (f) In the event Trustee receives written notice from Letter of Credit Bank or the Controlling Party that (i) the then current long-term unsecured debt rating of Letter of Credit Bank is less than "AAA" by Standard & Poor's or "Aaa" by Moody's 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 the Controlling Party from a Letter of Credit Bank acceptable to the Controlling Party 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 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. (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 and the Class B Certificate Account pursuant to Section 4.08(b). ---------------- (h) On each Deposit Date, after making those distributions described in Section 4.08(b)(i) through (xiii), Trustee shall distribute any amounts - --------------------------------- remaining in the Cash Collateral Account to Seller as Seller Amounts. 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 94.00% (subject to the proviso set forth below) of the sum of (i) the amount 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 original principal amount of any Class A Certificates issued 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, plus (ii) all Prepayment Fees to the ---- extent deposited into the Investment Account with respect to the related Determination Date pursuant to Section 2.03(d); provided, however, that, so long --------------- -------- ------- as any amount is owed hereunder with respect to the holders of the Class A Certificates, upon the occurrence of a Servicer Default, the Class A Certificate Principal Distributable Amount shall at all times be equal to the entire Class A Certificate Investor Interest. All Bond Insurer Premiums shall be paid out of amounts otherwise distributable to the Class A Certificateholders hereunder and under Section 4.07(a) hereof. --------------- (b) Class B Certificate Principal Distributable Amount. The amount -------------------------------------------------- required to be deposited as principal into the Class B Certificate Account on each Deposit Date (the "Class B Certificate Principal Distributable Amount") -------------------------------------------------- shall be an amount, as determined by Servicer in the Monthly Statement on the Determination Date, equal to 6.00% (subject to the proviso set forth below) of the sum of (i) the sum of the amount 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 original principal amount of any Class B Certificates issued 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, plus (ii) all Prepayment ---- Fees to the extent deposited into the Investment Account with respect to the related Determination Date pursuant to Section 2.03(d); provided, however, that, --------------- -------- ------- upon payment in full of all amounts owed hereunder with respect to the holders of the Class A Certificates, the sum "6.00%" set forth in this Section 4.06(b) --------------- shall automatically be deemed to be changed to "100.00%"; and provided, further, -------- ------- that in no event shall the Class B Certificate Principal Distributable Amount be more than the Class B Certificate Investor Interest. (c) 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. (d) Class B 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 B 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. All Bond Insurer Premiums shall be paid out of amounts otherwise distributable to the Class A Certificateholders hereunder and under Section ------- 4.06(a) hereof. - ------- (b) Class B Certificate Interest Distributable Amount. The amount required ------------------------------------------------- to be deposited as interest into the Class B Certificate Account on each Deposit Date (the "Class B 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 B 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 B 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 B Certificates. (c) 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. (d) Class B 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 B 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. (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 any and all funds on deposit in the Investment Account on such Determination Date to the extent that such funds relate to any amounts due and payable with respect to any Trust Assets or Equipment during any preceding Collection Period (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 (vii) and (viii) below; ----------------------- provided, further, however, 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 specified for such purpose under the Letter of Credit, any portion of any Servicer Advances which Servicer has certified to Trustee and the Controlling Party 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 or Successor Servicer on the Payment Date, to the extent of available funds, the Servicing Fee, the Successor Servicing Fee and the Transition Costs incurred by such Successor Servicer to the extent not previously paid on prior Payment Dates; (v) To Trustee on the Payment Date, to the extent of available funds, the Trustee Fee and the Transition Costs incurred by Trustee to the extent not previously paid on 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 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; (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 Principal Distributable Amount and any Class A Certificate Principal Shortfall Carryover; (ix) To Bond Insurer on the Payment Date, to the extent of available funds, 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; (x) the Class B Certificate Account on the Deposit Date, to the extent of available funds, an amount equal to, without duplication, the Class B Certificate Interest Distributable Amount and any Class B Certificate Interest Shortfall Carryover amounts as of the immediately preceding Payment Date; (xi) To the Class B Certificate Account on the Deposit Date, to the extent of available funds, an amount equal to, without duplication, the Class B Certificate Principal Distributable Amount and any Class B Certificate Principal Shortfall Carryover amounts as of the immediately preceding Payment Date; (xii) To the Letter of Credit Bank, the amount (if any) necessary to restore the Available LOC Amount to the Minimum LOC Amount, in accordance with the terms of the Letter of Credit Reimbursement Agreement; (xiii) To pay any Bond Insurer or any Certificateholder, any Transition Costs incurred by such Bond Insurer or Certificateholder and not previously reimbursed; and (xiv) 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 (xiii) 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 SunAmerica true and correct copies of all written agreements that constitute the entire agreements relating to the Accounts (collectively, 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 SunAmerica. Section 4.10 Payments under the Policy . ------------------------- (a) If on the close of business on the third Business Day immediately 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 Sections 4.08(b)(i) through (vi)) to make the payment of amounts of accrued - -------------------------------- interest on the Class A Certificates on such Payment Date in accordance with Section 4.08(b)(vii), Trustee shall, no later than 12:00 noon, New York time, on - -------------------- the second Business Day immediately preceding the Payment Date next occurring, 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 (A) the funds on deposit in the Investment Account and available to be distributed on such Payment Date pursuant to Section 4.08(b), and (B) the Available Amount, are not sufficient --------------- (after taking into account the payments required to be made on such Payment Date pursuant to Sections 4.08(b)(i) through (vii)) to pay in full the Class A --------------------------------- Certificate Investor Interest, 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 be used solely to pay (1) amounts due in respect of interest on the Class A Certificates on each Payment Date, and (2) amounts due in respect of principal of the Class A Certificates at the Stated Maturity. (b) In addition, on any day that Trustee has actual knowledge or receives notice that any amount previously paid to a Class A Certificateholder has been subsequently recovered by a trustee in bankruptcy 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 (each, a "Preference Claim" ---------------- and, collectively, the "Preference Claims"), Trustee shall, within three ----------------- Business Days thereafter, (i) make a drawing under the Letter of Credit in an amount equal to such Preference Claim, in the manner set forth in Section ------- 4.05(c), and (ii) if the then Available LOC Amount is less than the amount of - ------- such Preference Claim, then Trustee shall make a claim upon the Policy for an amount equal to the difference between (A) the amount of such Preference Claim, minus (B) the Available LOC Amount, in accordance with the terms of the Policy. - ----- Any proceeds relating to such Preference Claim received by Trustee under the Letter of Credit and/or the Policy shall be deposited in the Class A Certificate Account and shall be used solely to pay to the related Class A Certificateholders (1) amounts due in respect of interest on the Class A Certificates within two Business Days after such deposit, and (2) amounts due in respect of principal of the Class A Certificates at the Stated Maturity. If, at the Stated Maturity, Bond Insurer has not been fully reimbursed under Section ------- 4.08(b)(ix) for all such Preference Claims paid to Trustee on behalf of a Class - ----------- A Certificateholder in accordance with the terms of the Policy (collectively, the "Unreimbursed Preference Claims"), then (x) Trustee shall make a drawing ------------------------------ under the Letter of Credit in an amount equal to the Unreimbursed Preference Claims, in the manner set forth in Section 4.05(c), and (y) if the then --------------- Available LOC Amount is less than the amount of such Unreimbursed Preference Claims, then Trustee shall have a claim against, and shall be entitled to be reimbursed by, the Class B Certificateholders, on demand, on a pro rata basis, in an amount equal to the difference between (i) the Unreimbursed Preference Claims, minus (ii) the then Available LOC Amount. By accepting the Class B ----- Certificates, the Class B Certificateholders shall be deemed to have agreed to reimburse Trustee, on demand, on a pro rata basis, for the amount calculated in accordance with clause (y) of this Section 4.10(b); provided, however, that such ---------- --------------- -------- ------- amount shall not exceed the aggregate amount of principal payments previously distributed to the Class B Certificateholders under Section 4.08(b)(xi). ------------------- Trustee shall pay the proceeds received under clauses (x) and/or (y) of this ---------------------- Section 4.10(b) to Bond Insurer within two Business Days after Trustee's receipt - --------------- thereof. 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 Eligible Investments. Trustee shall provide to Servicer and the Controlling Party monthly written confirmation of such investments, describing the Eligible Investments in which such amounts have been invested. Any funds in the Investment Account, the Certificate Accounts and the Cash Collateral Account not so invested must be insured by the Federal Deposit Insurance Corporation to the limits established by such corporation. ARTICLE V DISTRIBUTIONS AND REPORTS TO CERTIFICATEHOLDERS Section 5.01 Distributions to Certificateholders. ----------------------------------- (a) On each Payment Date, 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 Bond Insurer, an amount equal to the Bond Insurer Premium with respect to the Collection Period immediately preceding such Payment Date; (ii) to each Holder of a Class A Certificate of record on the related Record Date, the difference between (A) the sum of such Certificateholder's pro rata share (based on the ratio of (1) the sum of -------- the products of one-twelfth (1/12) 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 (2) 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, minus (B) such ----- Certificateholder's pro rata share of the Bond Insurer Premium with respect -------- to the Collection Period immediately preceding such Payment Date; and (iii) to each Holder of a Class A Certificate of record on the related Record Date, the sum of 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 and the Class A Certificate Principal Shortfall Carryover. (b) On each Payment Date, Trustee shall distribute, or shall furnish to the Paying Agent for distribution, from the Class B Certificate Account (in accordance with the Monthly Statement) the following amounts: (i) to each Holder of a Class B 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 B Certificate held by such Certificateholder times the Certificate Balance of such Class B 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 B Certificate ------------ Interest Distributable Amount) of the amounts deposited into the Class B Certificate Account in respect of the Class B Certificate Interest Distributable Amount and the Class B Certificate Interest Shortfall Carryover; and (ii) to each Holder of a Class B Certificate of record on the related Record Date, such Certificateholder's pro rata share (based on the aggregate Class B Certificate Investor Interest represented by Class B 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 B Certificate ---- Account in respect of the Class B Certificate Principal Distributable Amount and the Class B Certificate Principal Shortfall Carryover. (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 Section 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 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, Rockford shall cause the Paying Agent to furnish (to the extent required by law) to each Person who at any time during the preceding calendar year was a Certificateholder a statement prepared by Rockford 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, Rockford 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 Exhibits "A" and "B", as applicable, 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 and Class B Certificates as directed by a written order of Seller. (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 Servicer and the Controlling Party. In the event that Trustee shall no longer be the Transfer Agent and Registrar, Trustee shall appoint a successor Transfer Agent and Registrar acceptable to the Controlling Party. 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 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 Certificates in Authorized Denominations of like aggregate amount. At the option of a Certificateholder, Certificates may be exchanged for other Certificates of the same class of Certificates (i.e, Class A Certificates or Class B Certificates) in 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 Trustee's standard retention policy. Each Certificateholder, by acceptance of its Certificates, agrees that the Certificates shall be limited recourse obligations payable from the Trust Assets, including any proceeds or payments made with respect to the Letter of Credit or the Policy. 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 the transfer of such Certificate (a) 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), (b) 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 (c) 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, the Controlling Party and Trustee a written certificate, in the form of Exhibit "F", as to the facts surrounding such transfer. Servicer, ----------- the Controlling Party 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, the Controlling Party 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, the Controlling Party 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. 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, the Controlling Party 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, the Controlling Party nor any agent of any of them shall be affected by any notice to the contrary. Section 6.07 Appointment of Paying Agent. --------------------------- (a) Trustee may appoint one or more Paying Agents acceptable to the Controlling Party. The Paying Agent shall make distributions provided by Trustee to Certificateholders from the respective Certificate Accounts 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 respective Certificate Accounts 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 the Controlling Party. 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, 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, the Controlling Party or the Paying Agent, within five Business Days after receipt by Trustee of a request therefor from Servicer, the Controlling Party or the Paying Agent, respectively, in writing, a list in such form as Servicer, the Controlling Party 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 (collectively, the "Applicants") evidencing not less ---------- than 10% of the Class A Certificate Investor Interest and not less than 10% of the Class B 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 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 the Controlling Party 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, the Controlling Party and to Servicer. Trustee may at any time terminate the agency of an authenticating agent by giving notice of termination to such authenticating agent, the Controlling Party and to 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 the Controlling Party, Trustee may and shall at the written direction of the Controlling Party 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 the Controlling Party. (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. (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. Section 6.11 Private Offering and Transferability. (a) All interests in ------------------------------------ the Trust shall be issued in a transaction (or transactions) which does not require registration under the Securities Act (and, in the case of an offering and sale of interests in the Trust exempt from registration under the Securities Act by reason of Regulation S, the offering and sale shall be conducted in such a manner that the offering and sale would not have been required to be registered under the Securities Act if the interests had been offered and sold within the United States). Further, neither Trustee nor any Certificateholder, acting individually or in concert with other Certificateholders, shall take any action that might reasonably be expected to cause interests in the Trust to be "traded on an established securities market" as defined in the Treasury Regulations under Section 7704 of the Internal Revenue Code. In no event will the Trust have more than 100 Certificateholders at any time after taking into account the ownership rules contained in the Treasury Regulations under Section 7704 of the Internal Revenue Code. (b) Subject to the transfer restrictions contained in Section 6.04 hereof, ------------ each Certificateholder expressly agrees not to sell, assign, transfer, or dispose of, by gift, pledge, hypothecation or otherwise, its Certificate or any interest therein (and no purported sale, assignment, transfer or disposition of a Certificate shall be effective) without the transferor Certificateholder giving prior written notice of the sale, assignment, transfer or disposition to Trustee, and receiving Trustee's prior written determination that such sale, assignment, transfer or disposition does not cause the Trust to have more than 100 Certificateholders after taking into account the ownership rules contained in the Treasury Regulations under Section 7704 of the Internal Revenue Code or cause interests in the Trust to be traded on an established securities market as provided in subparagraph (a) above. Trustee's determination of such matters ---------------- shall not be unreasonable. 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. (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 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 Bergen County, New Jersey 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. (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 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 Seller is as set forth in this Agreement, and ---- Seller has no tradenames, fictitious names, assumed names or "doing business as" names. (o) Subsidiaries. Seller has no subsidiaries. ------------ (p) Parent of Seller. Rockford is the registered owner of all of the ---------------- issued and outstanding common stock of 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. (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 bankruptcy 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 the Controlling Party 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 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 (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 the Controlling Party or which may be required by law to fully preserve and protect the interest of the Trust and Trustee in the Trust Assets. (c) Maintenance of Office, etc. Seller will not, without providing at -------------------------- least thirty (30) days prior written notice to Trustee and the Controlling Party 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 the Controlling Party may request and reasonably require. (e) Notice of Liens. Seller shall notify Trustee and the Controlling Party --------------- 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. For tax purposes, Seller is merely a nominee for ------------------- Rockford. If Seller is treated as a separate entity, Seller and Rockford will be considered members of an affiliated group within the meaning of section 1504 of the Internal Revenue Code, which will file, a consolidated return for federal income tax purposes. (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 legal owner and possessor of the Equipment related to such Lease Receivable (except with respect to 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. Rockford shall treat the --------------------------------------- Lease Contracts as owned by it for federal income tax purposes, and any affiliated group of which Rockford is a member within the meaning of section 1504 of the Internal Revenue Code, shall treat the Lease Contracts as owned by Rockford 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 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, Successor Servicer and Certificateholders. Rockford shall indemnify - --------------------------------------------------- and hold harmless the Trust, Trustee, Bond Insurer, Back-up Servicer, Successor 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. 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 the Controlling Party, (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 the Controlling Party, 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 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 the Controlling Party. (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 the Controlling Party; 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 the Controlling Party. (d) Seller shall conduct its affairs in accordance with the following provisions: (i) Seller shall furnish to Trustee, the Controlling Party 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; (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 Seller, except as expressly provided in the Agreements; and (ix) Except as provided in and subject to Section 12.14 hereof, ------------- 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 (e) At all times, at least one of the directors of Seller shall be an Independent Director. (f) 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. (g) 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. (h) 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. (i) 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. (j) 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. (k) 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. (l) 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. (m) 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. (n) 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. (o) Seller shall at all times cause the financial statements of Rockford to reflect the separate corporate existence of Seller. (p) Seller shall cause all of its business correspondence to reflect that business is being conducted in Seller's own name. Section 8.04 Servicer Reporting Requirements. (a) Servicer will deliver ------------------------------- to each Holder of outstanding Certificates, Bond Insurer, Back-up Servicer and Trustee (if different from Back-up Servicer): (1) Quarterly Statements -- within sixty (60) days after the end of -------------------- each of the first three quarterly fiscal periods in each fiscal year of 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 -- immediately upon ----------------------------------- becoming aware of the existence of any condition or event which constitutes Servicer Default, 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 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 $1,000,000 from Servicer or which may otherwise have a material adverse effect on the business, financial condition, property or prospects of Servicer; (5) Requested Information -- with reasonable promptness, any --------------------- other data and information which may be reasonably requested by Bond Insurer, the Certificateholders 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 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 the Controlling Party 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. - ------------------------------ (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. (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 (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 31st of each year, commencing July 31, 1998, 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. Section 8.06 Filing. No later than 30 days after the Initial Closing Date, ------ with respect to the Lease Contracts purchased by the Trust on the Initial Closing Date, and no later than 30 days after the related Subsequent Closing Date with respect to Lease Contracts purchased by the Trust on the such Subsequent Closing Date, Rockford and 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, the Controlling Party, and Trustee and no later than five (5) days after the effective date of such change or relocation, Servicer shall file such amendments or 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 (each, 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), in each case on or before the date --------------- occurring five (5) Business Days after the date such deposit, wire transfer or such instruction or notice is required to be made or given, as the case may be, under the terms of this Agreement; (b) failure on the part of Servicer to deliver the Monthly Statement in accordance with Section 3.09(a); --------------- (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 Trustee, or to Servicer and Trustee by the Majority Certificateholders or Bond Insurer; or , except as provided in Section ------- 9.02(a) hereof, 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, 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, (i) any of the events referred to in Sections 2.04 (h), (j) (other than a "threatened" action, ------------- proceeding or investigation, or an order, judgment or decree "proposed to be issued," as described therein), (l) or (m) of the Purchase Agreement shall have occurred, (ii) Sections 2.04(g) of the Purchase Agreement shall not have been ---------------- complied with, or (ii) the Net Worth Requirement shall not have been satisfied; (g) there shall at any one time be Defaulted Lease Contracts with Discounted Lease Contract Balances exceeding in the aggregate 3% of the then Initial Aggregate Certificate Principal Balance (in making such determination, the Discounted Lease Contract Balance of a Defaulted Lease Contract shall be determined without giving effect to the proviso in the definition of "Discounted Lease Contract Balance"); (h) there shall at any one time be Delinquent Lease Contracts with Discounted Lease Contract Balances exceeding in the aggregate 8.5% of the Aggregate Discounted Lease Contract Balance; (i) there shall at any one time be Pre-Default Lease Contracts with Discounted Lease Contract Balances exceeding in the aggregate 2.5% of the Aggregate Discounted Lease Contract Balance; (j) the ratio of Servicer's indebtedness exclusive of non-recourse indebtedness (as determined in accordance with generally accepted accounting principles consistently applied) to its shareholders' equity shall be greater than 4:1, as of the end of any fiscal quarter of Servicer: (k) there shall be a downgrading of the rating of any of the Certificates by any Rating Agency; (l) the Available Amount shall be less than the Minimum Available Amount; or (m) the Default Charge-off Ratio shall be more than 2.75%; (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, the Controlling Party shall have the right, in its sole discretion, to modify the foregoing Servicer Defaults) then, Trustee may or, at the written direction of the Controlling Party, by notice then given in writing to Servicer (a "Termination Notice"), shall terminate all of the rights and ------------------ obligations of Rockford 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 the Controlling Party, pass to and be vested in 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, the Controlling Party 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 Certificate Accounts or which shall thereafter be received with respect to the Trust Assets, 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 the Controlling Party has assumed such servicing functions. Upon receipt by Servicer and Back-up Servicer of a Termination Notice and consent from the Controlling Party, 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 the Controlling Party established pursuant to the preceding sentence without further action on the part of any Person; provided, however, that (i) 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 the Controlling Party, and (ii) Back-up Servicer or Successor Servicer may perform any duties of Servicer hereunder either directly or by or through agents or attorneys, and shall not be responsible for any misconduct or negligence on the part of any such agent, attorney or custodian appointed with due care by it hereunder, provided that Back-up Servicer or Successor Servicer may not delegate any material duties as Servicer hereunder without the written consent of the Controlling Party. 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, the Controlling Party may appoint a Successor Servicer and if the - ------------ Controlling Party fails to do so Trustee shall as promptly as possible after the giving of a Termination Notice appoint a Successor Servicer acceptable to the Controlling Party and such Successor Servicer shall accept its appointment by written assumption in a form acceptable to Trustee and the Controlling Party; any such Successor Servicer (other than Back-up Servicer) to be subject to the approval of the Controlling Party. 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 (such obligation on Trustee to only apply to appointment as the first Successor Servicer but not as the second 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 the Controlling Party. (b) Upon its appointment, and subject to the provisions of Section 9.02(c) --------------- below, 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 Servicer shall be deemed to refer to the Successor Servicer and except that Servicer Advances shall be repayable to Servicer or the Successor Servicer, as the case may be, that actually made such Servicer Advances. (c) In connection with such appointment and assumption, Successor Servicer shall be entitled to such reasonable compensation, or Trustee may make such arrangements for the reasonable compensation of Successor Servicer out of Collections, as it and such Successor Servicer shall agree, and that shall include the Servicer Fee and Successor Servicer Fee (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. (e) Following the delivery of a Termination Notice to Servicer, the Controlling Party may terminate Back-up Servicer or Successor Servicer within 5 Business Days upon written notice given to such party. Section 9.03 Notification to Certificateholders and Rating Agencies. ------------------------------------------------------ (a) Upon the occurrence of any Servicer Default, Servicer shall give prompt written notice thereof to Trustee and the Controlling Party, 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 the Controlling Party. (b) If at any time Servicer or Back-up Servicer becomes aware that the current sum of (i) the Available Amount, plus (b) the aggregate Class B Certificate Investor Interest (collectively, the "Aggregate Class A Credit ------------------------ Enhancement"), is equal to 25% or less of the Aggregate Class A Credit - ----------- Enhancement in effect immediately after giving effect to the sale of Certificates on the preceding Closing Date, the Controlling Party shall notify each of the Rating Agencies of such decline in the Aggregate Class A Credit Enhancement. Section 9.04 Waiver of Past Defaults. The Controlling Party or, with the ----------------------- prior written consent of Bond Insurer, the Majority Certificateholders, may, 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 Trustee to the Controlling Party. 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 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;(iii) the Successor Servicer may consult with counsel, and any opinion from such counsel (so long as such counsel is not an employee of the Successor Servicer or an Affiliate of the Successor Servicer) shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by the Successor Servicer in good faith in accordance with such opinion; (iv) the Successor Servicer shall not be responsible or liable for the validity, perfection, priority, continuation, or value of any security interest securing the Certificates, or for the value or collectibility of any Lease Contract, except in either case to the extent resulting from the Successor Servicer's gross negligence, reckless disregard of its duties, bad faith or willful misconduct; and (v) the Successor Servicer shall not be required to expend or risk its own funds for extraordinary expenses or otherwise incur extraordinary financial liability in the performance of its duties hereunder if it reasonably believes that the repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it (which assurance shall be deemed to have been given by an unsecured indemnity agreement from an institutional investor which is a Holder of Certificates and which has a net worth in excess of $50,000,000). The reference to extraordinary expenses and liabilities in part (v) of the preceding sentence refers to the expense for the out- of-pocket costs and expenses, including any attorneys' fees and expenses, incurred in connection with suits against Lessees for the enforcement of Leases, together with the risk of any liabilities or counterclaims which could be incurred in connection therewith. 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 Controlling Party 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 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 to which Trustee is a party, no implied covenants or obligations shall be read into this Agreement against Trustee and, in the absence of bad faith on the part of 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 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 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 the Controlling Party in any Trust Asset now existing or hereafter created or to impair the value of any Trust Asset now existing or hereafter created. (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 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 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, 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, and Trustee shall not be responsible for any misconduct or negligence on the part of any such agent, attorney or custodian appointed with due care by it hereunder, provided that Trustee may not delegate any material duties as Trustee hereunder without the written consent of the Controlling Party; (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 Servicer with their representations and warranties or for any other purpose; and (h) whenever in the administration of the provisions of this Agreement 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 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. ------------------------------------------------------ Servicer covenants and agrees to pay to Trustee from time to time, and Trustee shall be entitled to receive, reasonable and customary compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) for all services rendered by it in the execution of the trust hereby created and in the exercise and performance of any of the powers and duties hereunder of Trustee, and Servicer will pay or reimburse Trustee (without reimbursement from any Account or otherwise) upon Trustee's request for all reasonable out-of-pocket expenses, disbursements and advances incurred or made by Trustee in accordance with any of the provisions of this Agreement (including securities transaction charges, supervisory servicing, custodial fees such as default administration and the reasonable fees and expenses of its agents and counsel, but excluding the fees and expenses of any Registrar and Transfer Agent, Paying Agent or authenticating agent) except (a) any such expense, disbursement or advance as may arise from its gross negligence or bad faith or willful or reckless misconduct and (b) any such securities transaction charges referred to above that have been waived during a Collection Period because of Trustee's receipt, in the case of certain Eligible Investments specified by Servicer, of compensation from a financial institution in consideration of making such Eligible Investments. The aforesaid fees and expenses shall be set forth in a letter agreement between Trustee and Rockford. Such fees and expenses shall not be limited by any provision of law in regard to the compensation of a Trustee of an express trust. When Trustee incurs expenses or renders services during the continuance of any Servicer Default, the expenses and the compensation for the services are intended to constitute expenses of administration under any applicable bankruptcy law. 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 the Controlling Party and a national banking association organized and doing business under the laws of the United States of America or of any State, authorized 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, however, that any such successor trustee must be -------- ------- approved by the Controlling Party, 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 the Controlling Party. (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 the Controlling Party or by the Controlling Party, 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 the Controlling Party and shall at the direction of the Controlling Party, 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 the Controlling Party. In addition to the foregoing rights, and provided Seller first obtains the written consent of the Controlling Party (which may be given or withheld in the sole and absolute discretion of the Controlling Party), 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 Controlling Party. (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 the Controlling Party 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. 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 and all of 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 the Controlling Party. The appointment of any co-trustee or separate trustee shall not relieve Trustee of any of its obligations under the Principal Agreements. (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 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 the Controlling Party accept the resignation of or remove any separate trustee or co-trustee; and (iv) all duties owed hereunder to 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 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. (e) Servicer covenants and agrees to pay to any separate trustee or co- trustee from time to time, and any separate trustee or co-trustee shall be entitled to receive, reasonable compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) for all services rendered by it in the execution of the trust hereby created and in the exercise and performance of any of the powers and duties hereunder, and Rockford will pay or reimburse any separate trustee or co-trustee (without reimbursement from any Account or otherwise) upon its request for all reasonable out-of-pocket expenses, disbursements and advances incurred or made by such separate trustee or co-trustee in accordance with any of the provisions of this Agreement (including the reasonable fees and expenses of its agents and counsel) except any such expense, disbursement or advance as may arise from its gross negligence or bad faith; provided, however, that this compensation is limited to Trustee Fee and the letter agreement between Trustee and Rockford. 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 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 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 the Controlling Party. 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 the Controlling Party, 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 the Controlling Party to Direct Trustee. The ------------------------------------------------- Controlling Party 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: (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. Trustee initially appoints the Corporate Trust Office as its office for such purposes. Trustee will give prompt written notice to 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 of ---------------- the Rating Agencies, the Controlling Party and SunAmerica 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 Trustee for the benefit of the 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 ----------- Trustee confirms that its review of the Lease Files for the Lease Contracts has been completed without any exceptions other than those noted therein. 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, 10.04 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 the Controlling Party, 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 the Controlling Party with respect to the manner and terms of any such sale. Section 11.02 Optional Purchase. Seller 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 aggregate Certificate Principal Balance of all Certificates outstanding as of such date, plus all accrued but unpaid interest thereon (including, as applicable, accrued and unpaid interest as calculated at the Blended Class A Interest Shortfall Rate and the Blended Class B Interest Shortfall Rate, as provided in the definitions of "Class A Interest Shortfall Carryover" and the "Class B Interest Shortfall Carryover," respectively, plus (b) accrued interest on the Certificates for one ---- month, plus (c) any unpaid Servicing Fees, Back-up Servicer Fee, Trustee's Fee ---- and Transition Costs then due and payable, plus (d) all amounts due to Bond ---- Insurer hereunder and under the Insurance Agreement (collectively, 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 Investment Account and will be distributed by Trustee to the Certificateholders, 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 the Controlling Party) 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 hereunder upon payment in full of the of the respective Class A Certificate Investor Interest or Class B Certificate Investor Interest. Servicer's notice to Trustee and the Controlling Party 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 Optional Purchase Amount (as calculated on the final Payment Date), 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 the Controlling Party 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 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 the Controlling Party but without the consent of any of the Certificateholders, to cure any ambiguity or to correct or supplement any provisions herein which may be inconsistent with any other provisions herein; provided, however, that such action shall not, as evidenced -------- ------- by an Opinion of Counsel delivered by Servicer to Trustee and the Controlling Party, 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, Class B Certificate Investor Interest, Class A Certificate Distributable Amount or Class B 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 Minimum LOC Amount, Available Amount, Minimum Available Amount or Majority Certificateholders without the consent of each Certificateholder. Servicer shall deliver to Trustee and the Controlling Party, 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 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 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 the Controlling Party 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 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 the Controlling Party 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 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 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 10 Mountainview Road, Suite 103, South Wing, Upper Saddle River, New Jersey 07458, (b) in the case of Servicer, at 1851 East First Street, Suite 600, Santa Ana, California 92705, (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 Moody's, at 99 Church Street, New York, New York 10007, Attention: ABS Surveillance Group, (f) in the case of Standard & Poor's, at 26 Broadway, New York, New York, Attention: Asset Backed Surveillance Group, (g) in the case of Duff & Phelps, at 55 East Monroe Street, Chicago, IL 60603, Attention: Asset Backed Monitoring Group, (h) in the case of Bond Insurer, at 885 Third Avenue, New York, New York 10022, Attention: Head of Exposure Management or Senior Risk Officer, and (i) in the case of the Majority Certificateholders or any other Certificateholder, to SunAmerica c/o SunAmerica Life Insurance Company, 700 Louisiana, Suite 3905, Houston, Texas 77002, Attn: Mr. Tom Denkler. 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 Controlling Party. 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 the Controlling Party 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. 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 any thing 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. Section 12.14 Intention of Parties. For tax purposes, including -------------------- 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 though 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) Rockford and Seller agree to treat the transactions contemplated by this Agreement as a financing (and not as a sale of the Trust Assets by Rockford or Seller), and Rockford agrees 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. The function of Seller and the Trust is to provide for the segregation of the Trust Assets and to provide a mechanism for using the Trust Assets and the proceeds thereof for the payment of principal and interest on the Certificates. For tax purposes, Seller and the Trust serve merely as a nominee for Rockford. If the Trust is deemed to be a partnership for tax purposes, the Certificateholders shall be allocated gross income equal to the interest accrued on their Certificates; the balance of any income and all expenses shall be allocated to Rockford. Except as expressly provided in this Agreement or in the Purchase Agreement or the Equipment and Lease Purchase Agreement, neither Seller nor the Trust shall engage in any business or other activity. 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 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 the Controlling Party. (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. (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, Bond Insurer's right to consent hereunder and to direct Trustee shall be suspended until such Bond Insurer Default is cured. Section 12.19 Non-Petition. Each party hereto and Bond Insurer 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." [INTENTIONALLY LEFT BLANK.] 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 LIMITED I as Seller By: Larry Hartmann, President ROCKFORD INDUSTRIES, INC. as Servicer By: Gerry Ricco, President 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: SUNAMERICA LIFE INSURANCE COMPANY By: Name: Title: AGREED TO AND ACKNOWLEDGED WITH RESPECT TO SECTION 12.19 ABOVE: - ------------------------------------ CAPITAL MARKETS ASSURANCE CORPORATION By:____________________________________________ Name: Title: EX-10.40 6 AMEND. EQUIPMENT & LEASE PURCHASE AGREEMENT EXHIBIT 10.40 AMENDED, RESTATED AND CONSOLIDATED EQUIPMENT AND LEASE PURCHASE AGREEMENT THIS AMENDED, RESTATED AND CONSOLIDATED EQUIPMENT AND LEASE PURCHASE AGREEMENT (this "Agreement"), dated as of August 28, 1997, is entered into by --------- and between ROCKFORD LIMITED I, a New York corporation ("Purchaser"), and --------- ROCKFORD INDUSTRIES, INC., a California corporation ("Seller"). ------ RECITALS Seller and Purchaser (in its own capacity and as successor in interest to each of Purchaser's Predecessors through the merger thereof into Purchaser) are parties to each of the Existing Purchase Agreements (as these and the other capitalized terms used and not otherwise defined in these Recitals are defined in Section 1.01 hereof), pursuant to which, among other things, the Existing ------------ Trust Assets were transferred by Seller to Purchaser or one of Purchaser's Predecessors. Seller and Purchaser have entered into this Agreement in order to continue, modify, combine, consolidate and restructure the Existing Purchase Agreements to: (a) reflect the addition of a surety bond issued by a "AAA" or "Aaa" rated monoline insurance company under the Pooling and Servicing Agreement (as defined below); (b) cause the Class A Certificates to be issued under the Pooling and Servicing Agreement in replacement of the Existing Certificates (and all newly issued Class A Certificates to be issued thereunder) to receive a "AAA" or "Aaa" rating; (c) cause the Class B Certificates to be issued under the Pooling and Servicing Agreement in replacement of the Existing Certificates (and all newly issued Class B Certificates to be issued thereunder) to receive a "BBB" rating; (d) continue, combine, consolidate, modify (in various respects), add to and restate the representations, warranties, covenants and other obligations originally made in or created under the Existing Purchase Agreements with respect to the Existing Trust Assets and all other Lease Contracts and related Equipment to be sold to Purchaser hereunder; and (e) combine, consolidate, amend, restate and completely replace the Existing Purchase Agreements, all upon the terms and provisions and subject to the conditions hereinafter set forth. Accordingly each of the Existing Purchase Agreements is hereby modified, amended, combined, consolidated, restated, and replaced in their entirety in accordance with the following terms and conditions, effective as of the date hereof: RECITALS Any capitalized terms used but not defined in these recitals shall have the meaning ascribed thereto in Article I below. --------- Contemporaneously with the execution of this Agreement, (a) Purchaser (in its own capacity and as successor in interest to each of Purchaser's Predecessors through the merger thereof into Purchaser), as seller, Seller, as servicer, and Texas Commerce Bank National Association ("Trustee"), as trustee ------- and back-up servicer, and SunAmerica Life Insurance Company ("SunAmerica") have ---------- executed that certain Amended, Restated and Consolidated Pooling and Servicing Agreement of even date herewith (the "Pooling and Servicing Agreement"), and (b) ------------------------------- Purchaser, as seller, SunAmerica, as purchaser, and Seller and Trustee have executed that certain Purchase Agreement, of even date herewith (the "Purchase -------- Agreement"). - --------- The Purchase Agreement provides for the issuance (pursuant to the Pooling and Servicing Agreement) of up to $200,000,000 aggregate initial principal balance of Certificates (as such amount may be increased in Purchaser's sole discretion in accordance with Section 2.03(a) of the Purchase Agreement), as to --------------- all Certificates other than the Consolidated Certificates to be issued under the Pooling and Servicing Agreement on the Initial Closing Date. The Certificates evidence fractional undivided interests in a Trust with a corpus consisting of a pool of the Existing Trust Assets and the other Lease Contracts assigned to the Trust by Seller under the Pooling and Servicing Agreement. Under the terms of the Purchase Agreement, SunAmerica has agreed, subject to certain conditions, to purchase the Certificates from Purchaser. Purchaser desires to (a) reconfirm the purchase from Seller of the Existing Trust Assets, together with the Equipment covered thereby, in accordance with the terms and provisions of this Agreement and the Pooling and Servicing Agreement, and (b) purchase from Seller the other Lease Contracts that will be assigned by Purchaser to the Trust in accordance with the terms and provisions of this Agreement and the Pooling and Servicing Agreement, together with the Equipment covered thereby. Seller desires to (i) reconfirm the sale to Purchaser of the Existing Trust Assets, together with the Equipment covered thereby, in accordance with the terms and provisions of this Agreement and the Pooling and Servicing Agreement, and (ii) sell to Purchaser the other Lease Contracts that will be assigned by Purchaser to the Trust, together with the Equipment covered thereby, in accordance with the terms and provisions of this Agreement and the Pooling and Servicing Agreement. NOW, THEREFORE, in consideration of the agreements herein contained, the parties agree as follows. I. DEFINITIONS A. Certain Definitions. The following terms shall have the meanings ------------------- given them below: "Available Commitment Amount" shall mean $200,000,000 (as such amount --------------------------- may be increased in Purchaser's sole discretion in accordance with Section ------- 2.03(a) of the Purchase Agreement), minus the aggregate initial principal ------- ----- amount of all Certificates previously issued and authenticated pursuant to the Pooling and Servicing Agreement, other than the Consolidated Certificates to be issued under the Pooling and Servicing Agreement on the Initial Closing Date. "Bill of Sale and Assignment" shall mean the form of Bill of Sale and --------------------------- Assignment attached hereto as Exhibit "A-1" or "A-2". --------------------- "Existing Purchase Agreements" shall mean each of the following ---------------------------- agreements, as modified and supplemented as of the Initial Closing Date, but without giving effect to any of the modifications thereto provided in this Agreement: (a) the Purchase Agreement dated as of January 31, 1995, between Seller and Purchaser; (b) the Purchase Agreement dated as of February 23, 1996 between Seller and Rockford Limited II; (c) the Purchase Agreement dated as of June 28, 1996 between Seller and Rockford Limited II-B; (d) the Purchase Agreement dated as of September 27, 1996 between Seller and Rockford Limited II-C; and (e) the Purchase Agreement dated as of February 7, 1997 between Seller and Rockford Limited II-D. "Lease Contract" shall mean each Lease Contract (as such term is -------------- defined in the Pooling and Servicing Agreement) constituting part of the Existing Trust Assets and each other Lease Contract sold to Purchaser under this Agreement. "Principal Agreements" means this Agreement, the Pooling and Servicing -------------------- Agreement, the Purchase Agreement, the Capital Contribution Agreement, and the Insurance Agreement. "Purchaser's Predecessors" shall mean Rockford Limited II, Rockford ------------------------ Limited II-B Rockford Limited II-C and Rockford Limited II-D, each of which was a New York corporation that was merged into Seller prior to the date hereof. "Repurchase Price" shall have the meaning given to such term in ---------------- Section 6.01(a) hereof. ------- "Residual Value" means, with respect to the Equipment covered by a -------------- Lease Contract, the amount, if any, by which (a) the fair market value of such Equipment as of the Closing Date on which such Equipment is sold to Purchaser, exceeds (b) the Discounted Lease Contract Balance of such Lease as of such Closing Date. A. Other Definitions. Other capitalized terms used, but not defined ----------------- herein, shall have the meanings given them in the Pooling and Servicing Agreement. I. PURCHASE AND SALE OF EQUIPMENT AND LEASE CONTRACTS A. [Intentionally Omitted] A. Initial Closing Date Conditions. The Purchaser's obligations ------------------------------- hereunder shall be subject to the satisfaction (or waiver thereof by the Purchaser, the Trustee, the Bond Insurer and SunAmerica) on the Initial Closing Date of each of the conditions precedent set forth in Section 2.02 of the ------------ Purchase Agreement, which conditions precedent are hereby incorporated by reference herein to the extent they relate to Seller, with respect to the Existing Trust Assets and the other Lease Contracts and related Equipment covered by this Agreement. A. Closings. -------- 1. Subject to the terms and conditions set forth herein, (i) on the Initial Closing Date, Seller shall reconfirm the prior sale of the Existing Trust Assets to Purchaser subject to the terms and conditions of the Pooling and Servicing Agreement and the Purchase Agreement, and (ii) on each Subsequent Closing Date, Seller shall sell to Purchaser, and Purchaser shall purchase from Seller, those Eligible Lease Contracts and other rights and interests to be conveyed by Purchaser to the Trust on such Subsequent Closing Date under the terms of the Purchase Agreement and the Pooling and Servicing Agreement, together with the Equipment covered thereby; provided, however, that the sum of -------- ------- the aggregate initial principal balance of all "New Certificates" (as defined in the Purchase Agreement) purchased on each Subsequent Closing Date and all prior Subsequent Closing Dates shall not exceed the then Available Commitment Amount. The purchase price for the Eligible Lease Contracts and related Equipment to be sold on each Subsequent Closing Date shall be equal to the Aggregate Discounted Lease Contract Balance of such Eligible Lease Contracts. Notwithstanding anything to the contrary contained herein, all Closing Dates must occur no later than the Commitment Expiration Date. Purchaser shall have no further right or obligation to purchase Lease Contracts and Equipment on or after the Commitment Expiration Date. 1. Payment for and delivery of the Lease Contracts and related Equipment to be purchased by Purchaser from Seller on a Subsequent Closing Date (other than the purchase price for Existing Trust Assets, which Seller and Purchaser hereby confirm has previously been paid in full) shall be made at a closing at the offices of Purchaser set forth in Section 8.05(a) hereof at 12:00 noon New --------------- York City time on the relevant Closing Date. Payment of the purchase price for such other Lease Contracts and related Equipment shall be made by Purchaser in federal or other immediately available funds to Seller's account at CoreStates Bank, N.A., ABA no. 031-0000-11 for credit to loan account no. 14127-10740, account title: CoreStates Controlled Account for Rockford Industries, Inc., REF. Rockford. A. Subsequent Closing Conditions. Purchaser's obligation to purchase and ----------------------------- otherwise accept Lease Contracts and related Equipment from Seller on any Subsequent Closing Date (other than the Existing Trust Assets) shall be subject to the satisfaction (or waiver by Purchaser with the consent of the Controlling Party) on such Subsequent Closing Date of the following conditions precedent (references in this Section 2.04 to "Bill of Sale and Assignment", "Lease ------------ Contracts" and "Equipment" shall be deemed to refer to the Bill of Sale and Assignment to be executed by Seller in connection with such Subsequent Closing Date and the other Lease Contracts and Equipment covered by such Bill of Sale and Assignment): 1. The Pooling and Servicing Agreement, the Purchase Agreement, the Capital Contribution Agreement and the Insurance Agreement shall be in full force and effect. 1. The representations and warranties of Seller in the Principal Agreements shall be true and correct in all material respects on and as of the Subsequent Closing Date with the same effect as though such representations and warranties had been made on and as of such date, and Seller shall have complied with all the agreements and satisfied all the conditions under the Principal Agreements in all material respects on its part to be performed or satisfied at or prior to the Subsequent Closing Date. 1. One or more Bills of Sale and Assignment properly executed by Seller and confirming the prior conveyance to Purchaser of the Existing Trust Assets and related Equipment, and/or conveying to Purchaser the other Lease Contracts, the related Equipment and other rights and interests, shall have been delivered to Purchaser. 1. All conditions to closing as set forth in Section 2.03 and ------------ Section 2.04 of the Purchase Agreement shall have been fulfilled, to the ------------ extent they may be fulfilled prior to the performance by Purchaser of its obligations under this Agreement. A. Execution of Bill of Sale and Assignment. In connection with the ---------------------------------------- reconfirmation of the sale of the Existing Trust Assets Seller as of the Initial Closing Date, Seller shall execute a Bill of Sale and Assignment substantially in the form of Exhibit "A-1" hereto and deliver the same to Purchaser. In ------------ connection with each sale and purchase of the other Lease Contracts and Equipment hereunder as of any Subsequent Closing Date, Seller shall execute a Bill of Sale and Assignment substantially in the form of Exhibit "A-2" hereto ------------ and deliver the same to Purchaser. A. Intent of the Parties. Except as provided in Section 5.02 hereof with --------------------- ------------ respect to tax treatment only, it is the intention of the parties to this Agreement that the conveyance of Seller's right, title and interest in and to the Existing Trust Assets and the other Lease Contracts and Equipment pursuant to this Agreement shall constitute a purchase and sale and not a loan. If, notwithstanding the foregoing, the conveyance of the Existing Trust Assets and the other Lease Contracts and Equipment to Purchaser is characterized by any third party as a pledge, the parties intend that Seller shall be deemed hereunder to have granted (and does hereby grant) to Purchaser a first priority perfected security interest in all of Seller's right, title and interest in, to and under the Existing Trust Assets and the other Lease Contracts, Equipment and other rights, titles and interests covered by the Bill of Sale and Assignments and all monies due or to become due with respect thereto after the applicable Cut-Off Date, and all proceeds of any of the foregoing and that this Agreement shall constitute a security agreement under applicable law. A. Servicing of Lease Contracts and Equipment. In connection with the ------------------------------------------ contribution, assignment, transfer and conveyance of the Existing Trust Assets and the other Lease Contracts and the Equipment to the Purchaser pursuant to this Agreement, the Seller hereby agrees to service the Existing Trust Assets and the other Lease Contracts and Equipment for the benefit of the Purchaser (and its successors and assigns) in accordance with the terms and conditions of the Pooling and Servicing Agreement. A. Delivery of Lease Contracts. The Seller shall deliver the Existing --------------------------- Trust Assets and the other Lease Contracts and the items described in the definition of Lease Files to the Trustee so that the Trustee may retain possession thereof as provided in the Pooling and Servicing Agreement. A. Review of Lease Files. --------------------- 1. If the Purchaser, the Seller or the Trustee (who shall thereupon notify the Seller and the Trustee) discovers that any Lease Contract documents required to be in the Lease File are missing or defective (that is, mutilated, damaged, defaced, incomplete, improperly dated, clearly forged or otherwise physically altered) in any material respect, the Seller shall correct or cure such omission, defect or other irregularity within 30 days from the date the Seller discovered, or is notified by the Trustee of, such omission or defect and, if the Seller does not correct or cure such omission or defect within such period, the Seller shall repurchase such Lease Contract from the Purchaser or substitute a Substitute Lease Contract therefor, each in accordance with Section 6.01(a) hereof. --------------- 1. If the original Certificate of Title with respect to any Vehicle covered by a Lease Contract is not delivered to the Trustee within 90 days after the Closing Date on which such Lease Contract was sold to the Purchaser hereunder, then the Seller shall repurchase such Lease Contract from the Purchaser or substitute a Substitute Lease Contract therefor, each in accordance with Section 6.01(a) hereof. --------------- I. REPRESENTATIONS AND WARRANTIES OF SELLER Seller hereby represents and warrants to Purchaser as follows: A. Regarding Seller. ---------------- 1. Seller has the corporate power and authority to execute and deliver the Principal Agreements and to carry out their terms. 1. The consummation of the transactions contemplated by and the fulfillment of the terms of the Principal Agreements will not conflict with or require any consent or approval under (as applicable) the certificate of incorporation or by-laws of Seller. The consummation of the transactions contemplated by and the fulfillment of the terms of the Principal Agreements also will not (i) 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 by-laws of Seller or any material term of any material indenture, agreement, mortgage, deed of trust or other instrument to which Seller is a party or by which it is bound, (ii) 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 (iii) violate any law or any order, rule or regulation applicable to 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, which conflict, breach, Lien or violation might reasonably be expected to have a material adverse effect on the ability of Seller to comply with the terms of any of the Principal Agreements or a material adverse effect on the Existing Trust Assets and the other Lease Contracts, Equipment, and other rights and interests to be sold to Purchaser under this Agreement. 1. No consent, approval, authorization, order, registration, filing, qualification, license or permit of or with any 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 Seller of the Principal Agreements and the consummation of the transactions contemplated hereby and thereby. The Seller has obtained all necessary licenses, permits and charters required to be obtained by the Seller, which failure to obtain would render any portion of the Principal Agreements unenforceable and would have a material adverse effect on the Bond Insurer or the Certificateholders. 1. The Principal Agreements have been duly and validly authorized, executed and delivered by Seller and constitute valid and legally binding obligations of Seller, enforceable against Seller in accordance with their respective terms, except as such enforceability is subject to bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors' rights generally and the availability of equitable remedies. 1. There are no proceedings or investigations pending, or, to the knowledge of Seller, threatened, before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality (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, (iii) seeking any determination or ruling that might materially and adversely affect the performance by Seller of its obligations under, or the validity or enforceability of, any of the Principal Agreements, or (iv) if determined adversely might reasonably be expected to have a material adverse effect on the Existing Trust Assets and the other Lease Contracts, Equipment and other rights and interests to be sold to Purchaser under the terms of this Agreement. 1. The representations and warranties made by Seller in the Purchase Agreement, the Pooling and Servicing Agreement, the Capital Contribution Agreement and the Insurance Agreement are true and correct. 1. The chief executive office and principal place of business of Seller is located in Orange County, California, at the address set forth in this Agreement, and there have been no other such locations during the last four calendar months . 1. 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 beyond its ability to pay; 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. 1. There is no outstanding injunction, writ, restraining order or other order of any nature that reasonably may be expected to adversely affect Seller's performance of its obligations under the Principal Agreements or the consummation of the transactions contemplated thereby. 1. Seller is in compliance in all material respects 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. Seller has all material applicable permits, licenses and authorizations necessary for the conduct of its business and the ownership of its material assets. 1. Seller has filed on a timely basis all required tax returns. 1. All of the pension or profit sharing plans of Seller or any of its Affiliates have been fully funded in accordance with the applicable obligations of Seller and such Affiliates. 1. The legal name of Seller is as set forth in this Agreement. Seller has not changed its name in the last six years and does not have any trade names, fictitious names, assumed names or "doing business as" names, except that Seller is qualified to do business in the States of New Jersey and Oklahoma under the fictitious name "Rockford Financial, Inc." 1. Seller has valid business reasons for selling the Existing Trust Assets and the other Lease Contracts and related Equipment rather than obtaining a loan using such assets as collateral. 1. No event has occurred which materially and adversely affects Seller's operations or its ability to perform its obligations under or to consummate the transactions contemplated by the Principal Agreements. A. Regarding the Lease Contracts and Related Equipment. As of the --------------------------------------------------- Initial Closing Date with respect to all Lease Contracts and Equipment constituting part of the Existing Trust Assets and, with respect to all other Lease Contracts and related Equipment sold to Purchaser hereunder, on the Closing Date with respect to the sale of such other Lease Contracts and related Equipment: 1. There is no restriction or limitation in any of the Lease Contracts or otherwise on the sale of the Lease Contracts and Equipment to Purchaser pursuant to the terms of this Agreement or on the assignment by Purchaser of the Lease Contracts and other rights and interests to the Trustee pursuant to the terms of the Purchase Agreement and the Pooling and Servicing Agreement. The transfer, assignment and contribution to the Purchaser of the Lease Contracts, Lease Receivables and the Seller's right, title and interest in any item of Equipment will not violate the terms or provisions of any such Lease Contract or Lease Receivables or any other agreements to which the Seller then is a party or by which it is bound. 1. Seller owns, or will own immediately prior to the sale of such Lease Contract and Equipment to Purchaser hereunder, the Equipment covered by each Lease Contract (except for any computer software included therein, for which Seller's interest is limited to a non-exclusive transferable license) or has, or will have immediately prior to the sale of such Lease Contract and Equipment to Purchaser hereunder, a first priority perfected security interest in such Equipment. 1. The Seller will cause its records to be marked to reflect the transfer of the Lease Contracts to the Purchaser. 1. With respect to each Lease Contract, only one original of such Lease Contract exists and such Lease Contract along with all documents set forth in the definition of Lease File has been delivered to the Trustees. 1. Each Lease Contract is genuine and in full force and effect in accordance with its terms. Each Lease Contract is noncancelable by the Lessee during the term of such Lease Contract, and nothing has occurred or failed to be performed which would or might permit any Lessee to terminate such Lease Contract or suspend or reduce any payments or obligations due or to become due in respect of such Lease Contract by reason of default by the lessor party under such Lease Contract. No Lessee in respect of a Lease Contract is the subject of a bankruptcy, insolvency or other similar proceeding. 1. There does not exist any default or delinquency in the payment of any Scheduled Payments due under any Lease Contract in excess of 30 days and there does not exist any other default, breach, violation or event permitting acceleration, termination or repossession under any Lease Contract or any event which, with notice and the expiration of any applicable grace or cure period, would constitute such a default, breach, violation or event permitting acceleration, termination or repossession under such Lease Contract. Seller has no reason to believe that the Scheduled Payments under any Lease Contract will not be timely and fully paid. 1. All requirements of any federal, state or local law, rule or regulation, including without limitation, usury, applicable to each Lease Contract (including the origination, acquisition and servicing thereof) have been complied with in all material respects, and no party to any Lease Contract is in violation of any such law, rule or regulation. No Lease Contract violates any other agreement between Seller or any of its Affiliates and the Lessee thereunder. 1. Each Lease Contract has the following characteristics: a) () such Lease Contract was originated in the United States, Canada or Puerto Rico, and the Scheduled Payments thereunder are payable in U.S. dollars by a Lessee domiciled in the United States, Canada or Puerto Rico; a) () [Intentionally Omitted]; a) () no Lessee in respect of such Lease Contract is an Affiliate of Purchaser; a) () the Lessee under such Lease Contract has unconditionally accepted the Equipment covered by such Lease Contract; a) () Scheduled Payments due under such Lease Contract on and after the Cut-Off Date are payable into the Lockbox Account; a) () the Lessee under such Lease Contract does not have any contractual right to prepay the Scheduled Payments due under such Lease Contract; a) () such Lease Contract is an Eligible Lease Contract and complies with all applicable laws for the purposes for which the Equipment covered thereby is permitted to be used thereunder; and a) () such Lease Contract constitutes "chattel paper" under the UCC. 1. Each Lease Contract is a valid, binding and legally enforceable obligation of the parties thereto, enforceable in accordance with its terms by the Purchaser (and by the Trustee as assignee) (subject to bankruptcy, insolvency and other similar laws affecting creditors' rights in general and the availability of equitable remedies). 1. Each item of Equipment is subject to a Lease Contract. 1. Other than financing statements or similar statements or instruments of registration under the law of any jurisdiction on file or registered in any public office covering any interest of any kind in the Lease Contracts or Equipment which (i) are to be terminated, released or assigned to Trustee on or prior to the Closing Date hereunder, or (ii) are to be filed pursuant to this Agreement or the Pooling and Servicing Agreement, there are no such statements or instruments on file. 1. The Lessee under each Lease Contract is personally and unconditionally liable for the payment and performance of its obligations in respect of such Lease Contract. Pursuant to the terms of each Lease Contract, as of the Cut-Off Date the Lessee under each Lease Contract will be absolutely required to make to Trustee all payments (including, without limitation, all Scheduled Payments under such Lease Contract in respect of periods on and after the Cut-Off Date) and perform all obligations under such Lease Contract without abatement, deferment or defense of any kind or for any reason. No Lease Contract is subject to any right of claim, rescission, set-off, counterclaim, abatement or defense, including (without limitation) any defense of usury, nor will the operation of any of the terms of any Lease Contract or the exercise of any right or remedy thereunder render such Lease Contract or the obligations thereunder unenforceable, or subject the same to any right of claim, rescission, set-off, counterclaim, abatement or defense. No Lessee has asserted any such right of claim, rescission, set-off, counterclaim, abatement or defense to its obligations under its Lease Contract. 1. None of the Lease Contracts have been modified, amended or extended at any time (in the manner of an extension in the maturity date, a change in the amount or time of payment of any installment of rent, or in any way which would individually or in the aggregate materially adversely affect the Purchaser's or the Trustee's rights thereunder or would prohibit payment by the Lessee to the Trustee or otherwise), no indulgences or waivers have been granted in respect of the obligations of any Lessee under any Lease Contract, and none of Seller, Purchaser or any Affiliate of either such party has advanced any monies on behalf of or to cure any breach or default by any Lessee. 1. Each Lease Contract requires the Lessee thereunder at its own cost and expense to maintain the Equipment leased thereunder in good repair, condition and working order, and to the best of Seller's knowledge each Lessee is currently in compliance with such requirement. 1. Each Lease Contract requires the Lessee thereunder to pay all fees, taxes (except income taxes), and other charges or liabilities arising with respect to the Equipment leased thereunder or the use thereof, to keep the Equipment free and clear of any and all liens, security interests and other encumbrances, to hold harmless the lessor thereunder and its successors and assigns against the imposition of any such fees, charges, liabilities and encumbrances, to bear all risk of loss associated with the Equipment covered by or securing the obligations under such Lease Contract during the term of such Lease Contract and to maintain at the cost of the Lessee public liability and casualty insurance in respect of such Equipment covered by such Lease Contract. 1. Each Lease Contract prohibits without the lessor's prior written consent any relocation of the Equipment covered by such Lease Contract and requires the Lessee thereunder to execute such agreements and documents (including without limitation any UCC-1 financing statements or amendments thereto) as may reasonably be requested by the lessor in connection with any such relocation. 1. None of the Lease Contracts or any agreement with any Lessee requires the consent or approval of any Lessee with respect to the sale, assignment and transfer by Seller or Purchaser of their respective right, title and interest in and to such Lease Contracts and the Equipment covered thereby and grants of security interests in the Equipment under the Principal Agreements. 1. The rights with respect to each Lease Contract are assignable by the Seller without the consent of any person other than consents which will have been obtained on or before the Closing Date. 1. Each Lease Contract, Lease Receivable and the Seller's interest in the Equipment have not been sold, transferred, assigned or pledged by the Seller to any Person other than the Purchaser. 1. All federal, state and local sales, use, property and other similar taxes (and penalties and interest thereon) in respect to the Lease Contracts, any Equipment covered by or securing the obligations under the Lease Contracts, or any payments on the Lease Contracts, that have become due and payable have been paid to every applicable Governmental Authority. 1. The interest of Seller in respect of the Equipment covered by or securing the obligations under such Lease Contract has been duly perfected by the filing or recording in applicable jurisdictions of UCC financing statements or other documents sufficient to perfect Seller's interest in such Equipment in accordance with the perfection requirements of Section 2.01(d) of the Pooling --------------- and Servicing Agreement. Without limiting the generality of the foregoing, as to each such Lease Contract, Seller has properly filed in the appropriate locations in the state in which the Equipment covered by such Lease Contract is located properly executed UCC financing statements showing the Lessee as the lessee/debtor, Seller as the lessor/secured party, and the Equipment as collateral, and the same are in full force and effect. All Equipment is located within the United States, Canada or Puerto Rico. 1. Each Lease Contract involves the lease of tangible personal property owned by Seller or the loan of money secured by a security interest in tangible personal property owned by the Lessee thereunder, except in such case any computer software included therein, for which Seller's interest is limited to a non-exclusive, transferable license. 1. All filings and recordings required to perfect the title of Trustee to the Lease Contracts and Lease Receivables and Trustee's security interest in the Equipment in accordance with the perfection requirements of Section 2.01(d) of the Pooling and Servicing Agreement have been, or by the - --------------- applicable Closing Date will be, accomplished and are, or within 10 days after the applicable Closing Date will be, in full force and effect. 1. The Scheduled Payments due under the Lease Contracts covered by this Agreement, if paid in accordance with the Lease Schedule, are in an amount adequate to pay the original principal balance of the Class A Certificates and Class B Certificates issued or to be issued under the Pooling and Servicing Agreement in connection with this Agreement and interest thereon at the respective interest rates set forth in such Certificates and the Servicing Fee, Back-up Servicer Fee, Trustee Fee applicable to such Lease Contracts. 1. Each Lease Contract was originated or acquired by Rockford in the ordinary course of its business and at the time of such origination or acquisition satisfied Rockford's origination criteria for equipment leases of the type of the Lease Contracts (including, without limitation, credit, type of equipment, gross receivable limitation and other criteria). 1. The Equipment covered by each Lease Contract is insured against loss by fire and such other hazards as are customary for personal property of the same or similar type, such insurance being in an amount not less than the full replacement value of such Equipment subject to customary deductions, all in accordance with Section 3.02(x) of the Purchase Agreement. --------------- 1. The sale, transfer and conveyance by Seller of the Lease Contracts and related Equipment to Purchaser are not a "bulk transfer" within the meaning of Article 6 of the UCC as in effect in any applicable jurisdiction. 1. Seller has not received any notice challenging its ownership or the priority of its security interest in the Equipment covered by any Lease Contract, and there are no proceedings pending before any court or Governmental Authority or threatened by any Lessee or other party, (i) asserting the invalidity of any Lease Contract, (ii) seeking to prevent payment and performance by any Lessee of any Lease Contract or any other agreement between such Lessee and Seller, or (iii) seeking any determination or ruling that might adversely affect the validity or enforceability of any Lease Contract. 1. As to each Lease Contract, there are no agreements or understandings between Seller and the Lessee in respect of such Lease Contract or otherwise binding on Seller other than as expressly set forth in the written instruments contained in the Lease Files. 1. None of the Lessees is a Governmental Authority. 1. The Lease Schedule contains a statement of the amount and number of Scheduled Payments payable by each Lessee under each Lease Contract for periods on and after the Cut-Off Date applicable to such Lease Contract together with certain other information as reflected thereon. The information set forth in the Lease Schedule is true, complete and correct in all respects. 1. To the best knowledge of Seller, the historical delinquency and loss information set forth in Exhibit "H" to the Purchase Agreement is true and ----------- correct. 1. Seller has good and legal title to each of the Lease Contracts and Equipment (except for any computer software included therein, for which Seller's interest is limited to a non-exclusive, transferable license) and/or a first priority security interest in the Equipment in accordance with the perfection requirements of Section 2.01(d) of the Pooling and Servicing --------------- Agreement, in all cases free and clear of any encumbrances and adverse claims, except for the rights of the Lessees in and to the Equipment that are expressed in and under the Lease Contracts. 1. Neither Seller nor any of its Affiliates is a party to any contract for the servicing of the Lease Contracts or the related Equipment, other than the Pooling and Servicing Agreement. 1. Seller is not a party to any contract to sell or otherwise transfer any of the Lease Contracts or Equipment, other than the Principal Agreements and any purchase option rights granted to Lessees under the terms of their respective Lease Contracts as to the Equipment covered by such Lease Contract. 1. Neither Purchaser nor Seller has given any power of attorney (irrevocable or otherwise) to any Person for any purpose relating to the Lease Contracts or the Equipment, except for any power of attorney granted to any service entity that files UCC financing statements on Purchaser's or Seller's behalf. 1. Each Lease Contract and related Equipment, when transferred to the Purchaser hereunder, shall have been validly sold and delivered to Purchaser by Seller (who immediately prior to such assignment shall have owned full legal and equitable title to each Lease Contract). Upon delivery to Purchaser of the Lease Files, and execution and delivery of Bill of Sale and Assignments of all of the Lease Contracts and the related Equipment by Seller in favor of Purchaser, all of Seller's right, title and interest in and to the Lease Contracts and the related Equipment shall be validly and effectively transferred to Purchaser. 1. Seller is not selling the Equipment and the Lease Contracts with actual intent to hinder, delay or defraud any entity to which it is or will hereafter become indebted, is not insolvent on the Closing Date and will not become insolvent as a result of such sale, is not engaged in a business or transaction, or about to engage in a business or a transaction, for which any property remaining with Seller is an unreasonably small capital, and does not intend to incur, and does not believe that it will incur, debts that would be beyond its ability to pay as such debts mature. 1. All of the representations and warranties made by Purchaser in Section 3.02 of the Purchase Agreement with respect to the Existing Trust Assets - ----------- and all other Lease Contracts and Equipment that are not otherwise made by Seller hereunder are hereby incorporated by reference herein as if made by Seller with respect to the Lease Contracts and the related Equipment covered by this Agreement. In the event of any inconsistency between any of the representations and warranties set forth in this Section 3.02 and those set ------------ forth in Section 3.02 of the Purchase Agreement, Seller shall be deemed to have ------------ made the respective representations and warranties set forth in Section 3.02 of ------------ the Purchase Agreement. A. Other Representations. --------------------- 1. The written information supplied by Seller to the Controlling Party and the Rating Agencies in connection with obtaining a rating for the Certificates did not contain any untrue statement of a material fact or omit to state any material fact required to be stated in order to make such information not misleading. 1. No tax, assessment or other governmental charge will become payable by SunAmerica or the Trust as a result of (i) the sale, assignment and transfer to the Trust of the Existing Trust Assets and the other Lease Contracts pursuant to the Principal Agreements or (ii) the sale of the Certificates to SunAmerica as contemplated by the Purchase Agreement (other than taxes imposed with respect to the exchange of the Existing Certificates for new Certificates, or otherwise upon SunAmerica's or the Trust's gross or net income). Neither the ownership of the Certificates nor the transfer of the Existing Trust Assets and the other Lease Contracts or any other assets to the Trust shall, in and of itself, result in SunAmerica becoming subject to taxation or in its being deemed to be doing business in any jurisdiction in which any Lessee is located. 1. Neither Seller nor any of its respective officers, directors, employees or agents has employed any broker, finder or financial advisor or incurred any liability for any fees or commissions to any person in connection with the offering, issuance or sale of the Certificates except for any fees payable by Seller to SunAmerica or any affiliate thereof. A. Reconfirmation. Seller agrees that its participation in the -------------- transactions contemplated herein on each Closing Date shall constitute, without further act, a confirmation that each of its respective representations and warranties contained herein are true and correct on and as of such Closing Date as though made on and as of such Closing Date (except that the representations and warranties under Section 3.02 shall apply only to the Existing Trust Assets ------------ and the other Lease Contracts and Equipment conveyed on such Closing Date). II. REPRESENTATIONS AND WARRANTIES OF PURCHASER A. Generally. Purchaser represents and warrants to Seller that: --------- 1. Purchaser has the power and authority to execute and deliver this Agreement and to carry out its terms. 1. This Agreement has been duly authorized, executed and delivered by Purchaser, and constitutes a legal, valid and binding obligation of Purchaser enforceable against Purchaser in accordance with its 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. I. COVENANTS OF SELLER A. Generally. Seller agrees that it shall: --------- 1. Indicate on its computer files that all of the Seller's right title and interest in the Existing Trust Assets and the other Lease Contracts and Equipment sold and conveyed hereunder have been sold to Purchaser and that such Existing Trust Assets and the other Lease Contracts and the Seller's interest in the related Equipment have been sold by Purchaser to the Trustee for the benefit of the Certificateholders and the Bond Insurer; 1. Except for the transfers hereunder, Seller shall not sell, pledge, assign or transfer to any other person, or grant, create, incur, assume or suffer to exist any Lien on any Lease Contract or Equipment sold to Purchaser, or any interest therein; Seller will promptly notify Purchaser and the Controlling Party after Seller learns of the existence of any Lien on any Lease Contract or Equipment; and Seller shall defend the right, title and interest of Purchaser in, to and under the Lease Contract and Equipment sold to Purchaser, against all claims of third parties; 1. Take such actions, and provide to Purchaser and the Controlling Party such information, relating to the Existing Trust Assets and the other Lease Contracts, Equipment and the Lease Schedule as Purchaser or the Controlling Party shall from time to time require by notice to Seller to permit Purchaser to duly perform its duties and obligations under the Purchase Agreement, the Insurance Agreement or the Pooling and Servicing Agreement; 1. Respond to any inquiries with respect to ownership of a Lease Contract or related Equipment sold and purchased hereunder by stating that, from and after the applicable Closing Date relating thereto, Seller is no longer the owner of such Lease Contract and Equipment and that ownership of such Lease Contract is held by the Trust and ownership of such Equipment is held by the Purchaser, subject to the Lease Contract; and 1. Allow Purchaser and the Controlling Party and their representatives, upon reasonable prior notice, to 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 this Agreement, and the accuracy of its representations and warranties hereunder, and allow Purchaser and the Controlling Party and their respective representatives to examine and audit the same, and make photocopies thereof, and Seller shall render to Purchaser and the Controlling Party and their respective representatives, at Seller's cost and expense, such clerical and other assistance as may be reasonably requested with regard thereto. A. Characterization of Transactions for Tax Purposes. The Purchase ------------------------------------------------- Agreement and the transactions contemplated by the Pooling and Servicing Agreement have been structured with the intention that they will be treated as a financing transaction for purposes of federal, state and local income and franchise taxes and any other tax imposed on or measured by income and that the Certificates will be treated as indebtedness. Seller and Purchaser each agree to take no action inconsistent with the treatment of such transactions as a financing transaction and the Certificates as indebtedness for such tax purposes. Seller agrees to treat the transactions contemplated by the Principal Agreements as a sale of the Existing Trust Assets and the other Lease Contracts and Equipment from Seller to Purchaser, and a sale of Lease Contracts from Purchaser to the Trust, for financial accounting purposes. I. REPURCHASE OBLIGATION A. Repurchase Upon Breach of Certain Representations and Warranties. ---------------------------------------------------------------- 1. The representations and warranties of Seller set forth in Section ------- 3.02 hereof with respect to each of the Lease Contracts and related Equipment - ---- constituting part of the Existing Trust Assets, and each of the other Lease Contracts and related Equipment sold to Purchaser hereunder, shall continue so long as such Lease Contract remains outstanding. Upon discovery by Seller, Purchaser, Trustee, the Bond Insurer or any Certificateholder that any such representation or warranty with respect to any such Lease Contract and related Equipment covered hereby was incorrect as of the time made, such Person shall give prompt notice thereof to the other Persons. In the event that any such representation or warranty with respect to any such Lease Contract and related Equipment is incorrect and materially and adversely affects the interest of the Certificateholders or the Bond Insurer in such Lease Contract or related Equipment or the value of such Lease Contract or related Equipment, Seller shall 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 the Controlling Party may in its discretion consent to) after the discovery thereof by or notice thereof to Seller. If Seller fails or is unable to cure such circumstance or condition within such cure period (or if Seller is otherwise required to repurchase a Lease Contract or to provide a Substitute Lease Contract therefor under Section 2.09 hereof, and the respective ------------ cure period set forth in Section 2.09 hereof has expired), then by 3:00 p.m. New ------------ York City time on the next succeeding Determination Date after the expiration of the applicable cure period, Seller shall 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; provided, however, that -------- ------- each Substitute Lease Contract shall meet the Substitution Criteria and shall be subject to the requirements of Section 6.02 (b) hereof. The purchase price to ---------------- be paid by Seller for the repurchase of any such Lease Contract and related Equipment (the "Repurchase Price") shall be equal to the sum of (A) the Warranty ---------------- Purchase Amount for the Lease Contract, plus (B) the Residual Value of the ---- Equipment covered by the Lease Contract, plus (C) interest on such Residual ---- Value at the Discount Pool Rate applicable to such Lease Contract from the Initial Closing Date to the date that such Lease Contract and Equipment are repurchased. The proceeds of such Repurchase Price shall be remitted by Seller to Servicer for deposit by Servicer in the Investment Account on the date of closing of such repurchase. 1. It is understood and agreed that the obligation of Seller under Section 6.01(a) hereof to provide a substitute for or to repurchase any Lease - --------------- Contract and related Equipment shall, together with (but without duplication) the indemnification rights contained in the Principal Agreements, constitute the sole remedies against Seller available to Purchaser, SunAmerica, the Trust, the Certificateholders or Trustee on behalf of the Certificateholders respecting the breach by Seller of any representation or warranty under Section 3.02 hereof. ------------ A. Repurchase or Substitution of Leases. ------------------------------------ 1. With respect to any Lease Contract to be prepaid or terminated early, Seller shall in each such case be entitled either to purchase such Lease Contract and the related Equipment for the Repurchase Price or to deliver a Substitute Lease Contract therefor meeting the Substitution Criteria; provided, -------- however, that the cumulative Discounted Lease Contract Balance of all such - ------- prepaid or early-terminated Lease Contracts that are substituted for by Seller hereunder (measured as of the date of such substitution) shall not exceed 5.0 % of the Initial Aggregate Certificate Principal Balance (measured as of the date of such substitution). 1. Seller shall provide to Purchaser and Trustee on the date of delivery of any Substitute Lease Contract submitted by Seller under Section ------- 6.01(a)(ii) or Section 6.02(a) hereof the items listed in (i) and (ii) below, - ----------- --------------- and to the Controlling Party the item listed in (i) below, and Seller shall provide to Purchaser, Trustee and the Controlling Party at or before the end of each calendar quarter (or, with respect to each Substitute Lease Contract substituted by Seller hereunder on or after the fifteenth (15th) 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; a) () a supplement to this Agreement and to the Pooling and Servicing Agreement substantially in the form of Exhibit "B" hereto and ----------- Exhibit "H" to the Pooling and Servicing Agreement, subjecting such ----------- Substitute Lease Contract and all related Equipment to the provisions hereof and thereof, and providing with respect to the Substitute Lease Contract and related Equipment the information set forth in the Lease Schedule; a) () the original executed counterpart of the Lease Contract relating to such Substitute Lease Contract and the related Lease File, including (without limitation) any related Certificate of Title; and a) () evidence that financing statements have been filed with respect to such Substitute Lease Contract in accordance with the terms of this Agreement and Section 2.01(d) of the Pooling and Servicing Agreement --------------- A. Transfer and Assignment. ----------------------- 1. Seller shall be entitled to the transfer and assignment of any Lease Contract and the related Equipment by Purchaser to at any time: (i) after a payment by Seller of the Repurchase Price under Section 6.01(a) for such Lease --------------- Contract and related Equipment; (ii) after a Substitute Lease Contract is substituted for such Lease Contract in accordance with Section 6.01(a)(ii) or ------------------- Section 6.02(a) 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 such case, the Seller first delivers to Purchaser, - -------- Trustee and the Controlling Party an Officer's Certificate (A) identifying the Lease Receivable and the related Lease Contract and Equipment to be so transferred and assigned, (B) requesting the transfer and assignment thereof, (C) certifying that the requirements of Section 6.01(a)(ii) and Section 6.02 ------------------- ------------ hereof have been satisfied, in the event such Lease Contract and Equipment are being transferred and assigned pursuant to clause (iii) hereof, (D) setting forth the amount deposited in the Investment Account with respect to such Lease Contract and Equipment, in the event such Lease Contract and Equipment are being transferred and assigned the pursuant to clause (i) or (iii) hereof, and (D) certifying that the amount so deposited in the Investment Account equals (1) the Repurchase Price required to be paid under Section 6.01(a) for such Lease --------------- Contract and related Equipment, in the event of a transfer and assignment pursuant to clause (i) hereof, or (2) the entire amount of Recoveries or Residual Proceeds received with respect to such Lease Contract and related Equipment, in the event of a transfer and assignment 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 releasing such Equipment from the security interest granted to the Trustee by Purchaser pursuant to the Pooling and Servicing Agreement and prior to Purchaser transferring and assigning such Lease Contract and related Equipment to Seller pursuant to this Agreement. 1. Upon satisfaction of the conditions specified in Section 6.03(a) --------------- hereof, Purchaser shall release to Seller the related Lease Files and shall execute and deliver to or upon the order of Seller such instruments of transfer or assignment of such Lease Contract and related Equipment, in each case without recourse, representation or warranty, as Seller shall reasonably request (as shall be prepared by and at the expense of Seller). A. Merger or Consolidation of, or Assumption of the Obligations of the ------------------------------------------------------------------- Seller. - ------ 1. Except as hereinafter provided, the Seller will keep in full effect its existence, rights and franchises as a corporation, and will obtain and preserve its qualification to do business as a foreign corporation in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Agreement or any of the Lease Contracts and to perform its duties under this Agreement. 1. Any person into which the Seller may be merged or consolidated, or to whom the Seller has sold substantially all of its assets, or any corporation resulting from any merger, conversion or consolidation to which the Seller shall be a party, or any Person succeeding to the business of the Seller shall he the successor of the Seller hereunder and under the Pooling and Servicing Agreement, 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. Immediately after giving effect to such transaction, (i) no representation or warranty made pursuant to Section 3.01 hereof shall have been ------------ breached, (ii) the Seller shall deliver to the Purchaser, the Bond Insurer, the Trustee and each Certificateholder a certificate of an officer of the Seller and an Opinion of Counsel each stating that such consolidation, merger, or succession complies with this Section 6.04, that all conditions precedent, if ------------ any, provided for in this Agreement relating to such transaction have been complied with and that the surviving entity has succeeded to all of the duties and obligations of the Seller under this Agreement and the Pooling and Servicing Agreement, and (z) the Seller shall deliver to the Purchaser, the Trustee, the Bond Insurer, each Rating Agency and each Certificateholder an Opinion of Counsel either (1) stating that, in the opinion of such Counsel, all financing statements or other lien documents with respect to Lease Contracts and continuation statements and amendments thereto that are necessary to fully preserve and protect the interest of the Purchaser in the Lease Contracts have been executed and filed, or delivered, as the case may be, and reciting the details of such statements and documents, or (2) stating that, in the opinion of such Counsel, no such action shall be necessary to preserve and protect such interest. The Seller shall provide prior written notice of any such event to the Rating Agencies and the Controlling Party. A. Preservation of Security Interest. The Seller shall execute and file --------------------------------- such financing statements or other lien documents with respect to Lease Contracts relating to Vehicles and cause to be executed and filed such continuation statements, all in such manner and in such places as may be required by law to fully preserve, maintain, and protect the interest of the Purchaser under this Agreement in the Lease Contracts and in the proceeds thereof. The Seller shall deliver (or cause to be delivered) to the Purchaser and the Trustee file-stamped copies of, or filing receipts for, any document filed as provided above, as soon as available following such filing. The Seller shall not be required to file financing statements with respect to the Equipment, except to the extent provided in the Pooling and Servicing Agreement. A. Preservation of Name, etc. The Seller will not change its name, ------------------------- identity or corporate structure in any manner that would, could, or might make any financing statement or continuation statement filed by the Seller in accordance with Section 6.05 hereof or the Pooling and Servicing Agreement ------------ seriously misleading within the meaning of (S) 9-402 (7) of the UCC, unless it shall have given the Purchaser, the Controlling Party and the Trustee at least ten (10) days prior written notice thereof and shall have made such filings as are required by Sections 2.01(c) and (d) of the Pooling and Servicing Agreement ------------------------ in connection therewith. A. Preservation of Office. The Seller will give the Purchaser, the ---------------------- Controlling Party and the Trustee at least ten (10) days prior written notice of any relocation of its principal executive office if, as a result of such relocation, the applicable provisions of the UCC would require the filing of any amendment of any previously filed financing or continuation statement or of any new financing statement and shall make such filings as are required by Sections -------- 2.01(c) and (d) of the Pooling and Servicing Agreement in connection therewith. - --------------- A. Electronic Ledger. The Seller will mark the Lease Files and the Lease ----------------- Management System to the effect that the Lease Contracts and Equipment have been contributed to the Purchaser and that they have been transferred and assigned to the Trust pursuant to the Pooling and Servicing Agreement. A. Obligations with Respect to Lease Contracts. The Seller will duly ------------------------------------------- fulfill all obligations on its part to be fulfilled under or in connection with each Lease Contract, will not purport to change or modify the terms of the Lease Contracts except as expressly permitted by the terms of the Pooling and Servicing Agreement and will do nothing to impair the rights of the Purchaser or the Trust in the Lease Contracts, the Equipment or the Vehicles. In the event that the rights of the Seller under any Lease Contract, any guaranty of the related Lessee's obligations under any Lease Contract, or any Insurance Policy are not assignable to the Purchaser or to the Trust, the Seller will enforce such rights on behalf of the Trust. A. Compliance with Law. The Seller will comply, in all material ------------------- respects, with all material acts, rules, regulations, orders, decrees and directions of any governmental authority applicable to the Trust Assets or any part thereof; provided, however, that the 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 Purchaser or the Trust in the Trust Assets. A. Conveyance of Trust Assets; Security Interests. Except for the ---------------------------------------------- transfers and conveyances hereunder and pursuant to the Pooling and Servicing Agreement, the Seller will not sell, pledge, assign or transfer to any Person, or grant, create, incur, assume or suffer to exist any Lien, on any Trust Asset, or any interest therein and the Seller shall defend the right, title, and interest of the Purchaser and its successors and assigns in, to, and under the Trust Assets, against all claims of third parties claiming through or under the Seller, or any of its affiliates. A. Notification of Breach. The Seller will advise the Purchaser and the ---------------------- Trustee promptly, in reasonable detail, following discovery by or notice to the Seller of any breach by the Seller of any of its representations, warranties and covenants contained herein. A. Pooling and Servicing Agreement. On the Initial Closing Date, the ------------------------------- Seller shall enter into the Pooling and Servicing Agreement with the Purchaser, the Backup Servicer and the Trustee. A. Further Assurances. The Seller will make, execute or endorse, ------------------ acknowledge and file or deliver to the Purchaser 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 and other rights covered by this Agreement, as the Purchaser may request and reasonably require. A. Notice of-Liens. The Seller shall notify the Purchaser and the Trustee --------------- promptly after becoming aware of any Lien on any Trust Asset. A. Purchaser Status. The Seller shall not amend the certificate of ---------------- incorporation of the Purchaser without the prior written consent of the Rating Agencies, the Bond Insurer and the Majority Certificateholders. A. Purchaser's Stock. The Seller will not transfer, assign, convey or ----------------- sell the Common Stock of the Purchaser issued to it pursuant to the Capital Contribution Agreement. In furtherance of the Seller's negative covenant pursuant to the preceding sentence, the Seller will deliver to the Trustee on the Initial Closing Date each certificate representing any Common Stock of the Purchaser held by the Seller and the Seller promptly will deliver to the Trustee upon receipt by the Seller each certificate representing any additional shares of the capital stock of the Purchaser at any time thereafter acquired by the Seller to hold in escrow until the Trust is terminated. I. INDEMNITY A. Indemnities. (a) Seller shall defend and hold harmless, and hereby ----------- indemnifies, Purchaser, Trustee (except to the extent the following result from the gross negligence or willful misconduct of Trustee), the Trust, SunAmerica, the Bond Insurer, the Back-up Servicer and the Certificateholders from and against any taxes that may at any time be asserted against Purchaser, Trustee, the Trust, SunAmerica, the Bond Insurer, the Back-up Servicer or the Certificateholders or their respective directors, officers, employees and agents, with respect to (i) the execution and delivery of the Principal Agreements, (ii) the issuance of the Certificates, (iii) the depositing of funds into the Cash Collateral Account, and (iv) the sale, transfer and assignment of Lease Contracts and other rights and interests to Trustee for the benefit of the Certificateholders and the Bond Insurer, including, without limitation, any sales, gross receipts, general corporation, tangible or intangible personal property, privilege, or license taxes (but not including any taxes asserted with respect to ownership of the Equipment or Trust Assets or federal or other income taxes, including franchise taxes measured by net income, arising out of the transactions contemplated by the Principal Agreements), and reasonable out-of- pocket costs and expenses in defending against the same. 1. Seller shall defend and hold harmless, and hereby indemnifies, Purchaser, Trustee, the Trust, SunAmerica, the Bond Insurer, the Back-up Servicer and the Certificateholders, and their respective directors, officers, employees and agents, from and against any loss, liability or expense incurred by reason of (i) Seller's willful misfeasance, bad faith, or negligence in the performance of its duties under the Principal Agreements, or (ii) any action taken or failed to be taken as required by the terms of the Principal Agreements, by Seller in respect of any of the Lease Contracts or Equipment. 1. Seller shall defend and hold harmless, and hereby indemnifies, Purchaser, Trustee, the Trust, SunAmerica, the Bond Insurer, the Back-up Servicer and the Certificateholders, from and against any and all loss, liability, damage, judgment, claim, deficiency or expense that arises out of or is based upon (i) a breach at any time by Seller of its representations, warranties and covenants contained in the Principal Agreements, (ii) any information certified in any schedule or other writing delivered by Seller hereunder, being untrue in any material respect when any such representation was made or schedule delivered, or (iii) any act or omission in respect of a Lease Contract or its related Equipment occurring prior to the Closing Date on which the Lease Contract and Equipment were purchased hereunder; provided, however, -------- ------- that Seller shall not be so required to indemnify Purchaser, Trustee, the Trust, SunAmerica, the Back-up Servicer and the Certificateholders for or on account of or arising from or in connection with any breach of a representation or warranty a remedy for the breach of which is provided in Article VI hereof, except in ---------- respect of claims, demands and causes of action of Lessees, Governmental Agencies, or other third parties. 1. Seller shall also indemnify, defend and hold harmless Purchaser, Trustee, the Trust, SunAmerica, the Bond Insurer, the Back-up Servicer and the Certificateholders and their respective directors, officers, employees and agents, from and against any loss, liability or expense incurred by reason of the violation by any of such parties of federal or state securities laws in connection with the sale of the Certificates, to the extent such violation results from (i) any information furnished by or on behalf of Seller that in turn was furnished to the Certificateholders or the Bond Insurer, or (ii) the failure of Seller to furnish to Purchaser and the Controlling Party any information known by any officer or agent of Seller and that was not otherwise known by any officer or agent of the Controlling Party, SunAmerica or any of its Affiliates. 1. THE INDEMNITIES OF SELLER UNDER THIS SECTION 7.01 SHALL APPLY ------------ NOTWITHSTANDING THAT A CLAIM, DEMAND, LIABILITY, LOSS, COST OR EXPENSE IS ATTRIBUTABLE IN WHOLE OR IN PART TO THE NEGLIGENCE OF ANY OF THE INDEMNIFIED PARTIES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW. 1. Indemnification under this Section 7.01 shall include reasonable ------------ out-of-pocket fees and expenses of counsel and expenses of litigation, shall survive the execution, delivery and performance of this Agreement regardless of any investigation made by the indemnified parties or any other Person, and shall also survive termination of the Trust or the repurchase of a Lease Contract. If Seller shall have made any indemnity payments to Purchaser, Trustee, SunAmerica, the Trust, the Back-up Servicer and the Certificateholders pursuant to this Section 7.01 and Purchaser, Trustee, ------------ SunAmerica, the Trust and the Certificateholders thereafter shall collect any of such amounts from persons other than Seller, Purchaser, Trustee, SunAmerica, the Trust, the Back-up Servicer or the Certificateholders, as the case may be, shall promptly upon receipt thereof repay such amounts (or use its best efforts to cause Purchaser, Trustee, SunAmerica, the Back-up Servicer or the Certificateholders to repay such amounts) to Seller, without interest. I. MISCELLANEOUS A. Survival. Each of the parties agrees that the representations, -------- warranties and agreements made by it herein and in any certificate or other instrument delivered pursuant hereto shall be deemed to be relied upon by the other party hereto, notwithstanding any investigation heretofore or hereafter made by such other party or on its behalf, and that the representations, warranties and agreements made by each of the parties hereto herein or in any such certificate or other instrument shall survive the delivery and payment for the Lease Contracts and Equipment. The provisions of this Section 8.01 shall ------------ survive any termination or cancellation of this Agreement. A. Governing Law; Counterparts. This Agreement is to be governed by, and ---------------------------- interpreted, construed and enforced in accordance with, the internal law of the State of New York without regard to principals of conflicts of laws. This Agreement may be executed in two or more counterparts, each of which when so executed and delivered shall be an original, but all of which together shall constitute one and the same instrument. A. Amendments. Subject to the provisions of Section 8.10, this Agreement ---------- ------------ or any term hereof may not be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought provided that the Controlling Party shall have given its prior written consent. The Seller shall give prompt written notice of any amendment to this Agreement to each of the Rating Agencies. A. Headings. The headings in this Agreement are for purposes of reference -------- only and shall not limit or otherwise affect the meaning hereof. A. 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 (a) when delivered against receipt of registered or certified mail or upon actual receipt of registered or certified mail, postage prepaid, return receipt requested; (b) when delivered by courier with appropriate evidence of receipt; or (c) upon transmission via facsimile transmission with appropriate evidence of receipt at the following address of the recipient: (i) in the case of Seller, at 1851 East First Street, Suite 600, Santa Ana, California 92705, (ii) in the case of Purchaser, at 10 Mountainview Road, Suite 103, South Wing, Upper Saddle River, New Jersey 07458, and (iii) in the case of the Bond Insurer, at 885 Third Avenue, New York, New York 10022, Attention: Head of Exposure Management or Senior Risk Officer. 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 8.05 for giving notice ------------ and by otherwise complying with any applicable terms of this Agreement. A. 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. A. Assignment. This Agreement may not be assigned by Seller or Purchaser ---------- without the prior consent of the Controlling Party. Subject to the foregoing, this Agreement shall inure to the benefit of, and be binding on, the parties hereto, and their successors and assigns. A. Further Assurances. Seller and Purchaser 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 either party, the Controlling Party, SunAmerica or the 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 Lease Contracts and the Equipment for filing under the provisions of the UCC or other relevant laws of any applicable jurisdiction. A. No Waiver; Cumulative Remedies. No failure to exercise and no delay in ------------------------------ exercising, on the part of any party hereto, 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. A. Third-Party Beneficiaries. In addition to being for the benefit of ------------------------- Purchaser, each covenant, representation and warranty of Seller under this Agreement is expressly for the direct benefit of the Trustee, the Trust, SunAmerica, the Certificateholders, and the Bond Insurer, the Back-up Servicer, their respective successors and assigns as fully as if the Trustee, the Trust, SunAmerica, the Bond Insurer, the Back-up Servicer and the Certificateholders were parties to this Agreement and such covenants were made with, and such representations and warranties were made to, the Trustee, the Trust, SunAmerica, the Bond Insurer and the Certificateholders. Seller acknowledges that the Trustee and Back-up Servicer, on behalf of the Trust and the Bond Insurer, and SunAmerica, have executed the Pooling and Servicing Agreement and the Purchase Agreement and the Certificateholders have purchased the Certificates in reliance, in part, on Seller's covenants, representations and warranties under this Agreement. The Trustee, SunAmerica, the Bond Insurer, the Back-up Servicer and/or the Certificateholders may directly enforce against Seller in their own names each of Seller's covenants, representations and warranties under this Agreement, without the joinder of Purchaser. Notwithstanding any other term or provision hereof, no amendment of this Agreement shall be effective as to SunAmerica, the Trustee, the Trust, the Bond Insurer and the Certificateholders unless such amendment has been approved by SunAmerica, the Trustee, the Bond Insurer, and the Majority Certificateholders. SunAmerica, the Bond Insurer, the Back-up Servicer, the Trustee, the Trust and the Certificateholders do not assume, and shall have no liability for, any of the obligations of Purchaser under this Agreement. A. 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. [INTENTIONALLY LEFT BLANK.] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. ROCKFORD LIMITED I By: Larry Hartmann President ROCKFORD INDUSTRIES, INC. By: Gerry J. Ricco President EXHIBITS -------- A. Bill of Sale and Assignment B. Supplement to Equipment and Lease Purchase Agreement (Substitute Leases) EX-10.41 7 PURCHASE AGREEMENT DATED 8/28/97 EXHIBIT 10.41 PURCHASE AGREEMENT THIS PURCHASE AGREEMENT (this "Agreement"), dated as of August 28, 1997, is --------- entered into by and among ROCKFORD LIMITED I, a New York corporation ("Seller"), ------ ROCKFORD INDUSTRIES, INC., a California corporation ("Rockford"), SUNAMERICA -------- LIFE INSURANCE COMPANY, an Arizona corporation ("Purchaser"), and TEXAS COMMERCE --------- BANK NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America (the "Trustee"), in its capacity ------- as trustee under the trust created pursuant to the Pooling and Servicing Agreement described below. RECITALS Contemporaneously with the execution of this Agreement, Seller (in its own capacity and as successor in interest to each of Seller's Predecessors through the merger thereof into Seller), as seller, Rockford, as servicer and Trustee, as trustee and back-up servicer, and Purchaser have executed the Amended, Restated and Consolidated Pooling and Servicing Agreement dated of even date herewith (the "Pooling and Servicing Agreement"). Seller proposes, subject to ------------------------------- the terms and conditions stated herein, to sell to Purchaser Class A Certificates and Class B Certificates issued pursuant to the Pooling and Servicing Agreement, in exchange for Purchaser's transfer of the Existing Certificates to Seller on the Initial Closing Date and in exchange for cash consideration on each Subsequent Closing Date. As to all Certificates other than the Consolidated Certificates to be issued under the Pooling and Servicing Agreement on the Initial Closing Date, the aggregate initial principal balance of such Certificates shall not exceed $200,000,000, as such amount may be increased in Purchaser's sole discretion in accordance with Section 2.03(a) --------------- hereof. Capitalized terms used in this Agreement have the meanings provided in Article I below. The Certificates described below evidence fractional undivided - --------- interests in a Trust with a corpus consisting of a pool of Lease Contracts serviced by Rockford. Purchaser desires to purchase from Seller the Class A Certificates and Class B Certificates to be issued from time to time by the Trust, and Seller desires to sell the Class A Certificates and Class B Certificates to Purchaser, subject to the terms and provisions of this Agreement. NOW, THEREFORE, in consideration of the agreements herein contained, the parties agree as follows. ARTICLE I DEFINITIONS Section 1.01 Certain Definitions. The following terms shall have the ------------------- meanings given them below: "Available Commitment Amount" shall have the meaning given such term --------------------------- in the Equipment and Lease Purchase Agreement. "Bill of Sale and Assignment" shall have the meaning given such term --------------------------- in the Equipment and Lease Purchase Agreement. "Commitment Expiration Date" shall mean AUGUST 28, 2000, or such later -------------------------- date as Purchaser may elect in its sole discretion. "Deferred Lease" means any Lease Contract under which the Lessee is -------------- not required to make any Scheduled Payment (or the Scheduled Payments are each zero) for at least four months (but not more than six months) immediately following the commencement date of such Lease Contract. "Eligible Lease Contract" shall mean, as of the relevant date, a Lease ----------------------- Contract: (a) which, if included in the Trust, would not cause any representation or warranty of Seller contained in Section 3.02 hereof ------------ to be untrue or incorrect; and (b) with respect to which Purchaser has not notified Seller that such Lease Contract is unacceptable for purchase. "Event of Bankruptcy" shall be deemed to have occurred with respect to ------------------- a Person if either: (a) (i) a case or other proceeding shall be commenced, without the application or consent of such Person, in any court, seeking the liquidation, reorganization, debt arrangement, dissolution, winding up, or composition or readjustment of debts of such Person, the appointment of a trustee, receiver, custodian, liquidator, assignee, sequestrator (or other similar official) for such Person or all or substantially all of its assets, or any similar action with respect to such Person under any law relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, and such case or proceeding shall continue unstayed or undismissed for a period of 15 days; or (ii) an order for relief in respect of such Person shall be entered in an involuntary case under the federal bankruptcy laws or other similar laws now or hereafter in effect; or (b) such Person (i) shall commence a voluntary case or other proceeding under any applicable bankruptcy, insolvency, reorganization, debt arrangement, dissolution or other similar law now or hereafter in effect, or (ii) shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) for, such Person or for any substantial part of its property, or (iii) shall make any general assignment for the benefit of creditors, or shall fail to, or admit in writing its inability to, pay its debts generally as they become due, or, if a corporation or similar entity, its board of directors shall vote to implement any of the foregoing. "Final Scheduled Payment" shall mean the final Scheduled Payment under ----------------------- a Lease Contract, excluding any purchase option payment or other residual payment. "Funding Period" shall mean, initially, the period commencing on the --------------- Initial Closing Date through (and including) FEBRUARY 28, 1999; provided, -------- however, that the Funding Period shall automatically be extended through (and - ------- including) the Commitment Expiration Date unless, on or before AUGUST 28, 1998, Bond Insurer or Purchaser notifies the other and Seller of such party's election not to so extend the Funding Period; provided, further, that each Rating Agency -------- ------- receives notice of such automatic extension on or before FEBRUARY 28, 1999. "Sale Assignment" shall mean a Sale Assignment in the form attached --------------- hereto as Exhibit "B-1" (with respect to the Existing Trust Assets) or "B-2" ------------ --- (with respect to other Eligible Lease Contracts). Such assignment shall be without recourse to Seller, but subject to Seller's covenants, representations, warranties and indemnities specifically provided herein. "Step Lease" means any Lease Contract (other than a Deferred Lease) ---------- under which either (a) the requirement that the Lessee make equal Scheduled Payments thereunder does not begin until the thirteenth (13th) month immediately following the commencement date of such Lease Contract, or (b) the Lessee is not required to make any Scheduled Payment for up to three months immediately following the commencement date of such Lease Contract and is not required to made equal Scheduled Payments thereunder during the first 18 months immediately following the commencement date of such Lease Contract. "Subsequent Closing Notice" has the meaning given to such term in ------------------------- Section 2.03(b). --------------- "Treasury Rate" shall have the meaning given such term in Section ------------- ------- 2.05. ---- "Warranty Purchase Amount" shall have the meaning given such term in ------------------------ Section 7.01(c). ---------------- Section 1.02 Other Definitions. Other capitalized terms used, but not ----------------- defined herein, shall have the meanings given them in the Pooling and Servicing Agreement. ARTICLE II PURCHASE AND SALE OF CERTIFICATES Section 2.01 [Intentionally Omitted] Section 2.02 Initial Closing Date Conditions. Trustee's obligations ------------------------------- hereunder shall be subject to the satisfaction (or waiver by Trustee, Bond Insurer and Purchaser) on the Initial Closing Date of each of the following conditions precedent: (a) On or before the Initial Closing Date, Seller and Rockford shall deliver or cause to be delivered the following documents to Trustee, Purchaser and Bond Insurer: (i) An Officer's Certificate of Seller substantially in the form of Exhibit "C" and an Officer's Certificate of Rockford substantially in the ----------- form of Exhibit "D"; ----------- (ii) Opinions of Counsel for Seller and Rockford substantially in the form of Exhibit "E" with respect to the treatment of the transfer from ----------- Rockford to Seller as a "true sale," certain bankruptcy issues with respect to Seller, tax and securities issues and the first priority perfected security interest of Trustee in the Trust Assets; (iii) Copies of resolutions of the board of directors of Seller approving the execution, delivery and performance by Seller of the Principal Agreements and the transactions contemplated hereunder and thereunder, certified by the secretary or any assistant secretary of Seller, and copies of resolutions of the board of directors of Rockford approving the execution, delivery and performance by Rockford of the Principal Agreements and the transactions contemplated thereunder, certified by the secretary or any assistant secretary of Rockford; (iv) Officially certified, dated not more than thirty (30) days prior to the Initial Closing Date, evidence of due incorporation and good standing of Seller under the laws of New York and of Rockford under the laws of California, and evidence of Seller's and Rockford's respective good standing and authority to conduct business under the laws of California and each other jurisdiction in which the ownership or leasing of property by such party or the conduct of its business requires qualification, except for those jurisdictions for which both of the following are satisfied: (a) the failure to so qualify in such jurisdiction will not impair the ability of Seller or Rockford to enforce in such jurisdiction the obligations of the Lessee under any Lease Contracts covering Equipment located in such jurisdiction, and (b) the failure to so qualify in such jurisdiction and in all other jurisdictions in which it is not qualified would not, in the aggregate, materially adversely affect the assets, liabilities, financial condition, business or operations of Seller or Rockford or the ability of either such party to perform its obligations under the Principal Agreements; (v) Submission for filing of all UCC-1 financing statements and UCC-3 assignments prepared by Seller's counsel described in Exhibit "F" or ----------- other instruments necessary to perfect, upon submission for filing by Seller, the first priority ownership or security interests granted and assigned by Seller under the Principal Agreements and Sale Assignments to Trustee for the benefit of the Certificateholders and Bond Insurer in the Lease Contracts, Equipment and other rights, titles and interests referred to hereunder (other than UCC-1 financing statements naming the Lessees under the Lease Contracts as debtors) to be filed or recorded in all such appropriate places as are required to protect the Trust's interest in the Lease Contracts, Equipment and such other rights, titles and interests; (vi) [Intentionally Omitted]; (vii) An Officer's Certificate of Servicer identifying Servicing Officers; (viii) An Officer's Certificate of Servicer stating that the original executed counterpart of each Lease Contract identified in the related Lease Schedule, and the related Lease Files, have each been delivered to Trustee, and that Servicer has marked the Lease Management System and other physical records of the Lease Contracts to the effect that, as to the Lease Contracts, Seller has sold and assigned all of its right, title and interest therein to the Trust; (ix) Evidence that Servicer has in effect the fidelity bond or employee dishonesty policy described in Section 3.07(g) of the Pooling and Servicing Agreement; (x) A properly executed copy of the Equipment and Lease Purchase Agreement; (xi) The initial Lease Schedule for the Lease Contracts and the related Lease Files; (xii) Secretary's Certificate of Rockford covering the resolutions adopted by its Board of Directors as to Principal Agreements, incumbency and signatures of the officers of Rockford signing the Principal Agreements, and the certificate of incorporation and bylaws of Rockford; (xiii) UCC Lien search of recent date issued by the Office of the Secretary of State of the State of California and the other states listed on Exhibit "J" hereto covering Rockford and reflecting no financing ----------- statement filings against the Lease Contracts and related Equipment other than those to be terminated on or before the Initial Closing Date; (xiv) [Intentionally Omitted]; (xv) Secretary's Certificate of Seller covering the resolutions adopted by its Board of Directors as to Principal Agreements, the incumbency and signatures of the officers of Seller signing the Principal Agreements, and the certificate of incorporation and bylaws of Seller; (xvi) UCC Lien searches of recent date issued by the Offices of the Secretaries of State of New York and California covering Seller and reflecting no financing statement or lien filings against Seller or any assets of Seller other than those made pursuant to the Pooling and Servicing Agreement and naming Trustee as secured party; (xvii) A Capital Contribution Agreement in the form of Exhibit "G" ----------- properly executed by Rockford and Seller (the "Capital Contribution -------------------- Agreement"); --------- (xviii) Such other documents, Opinions of Counsel and certificates as Trustee, Purchaser or Bond Insurer may reasonably request; (xix) With respect to Vehicles owned by the Seller, Seller (A) shall have delivered to Trustee, Certificates of Title or Applications for Certificates of Title, and (B) shall deliver to Trustee within ninety (90) days of the Initial Closing Date, original Certificates of Title for such Vehicles; and (xx) With respect to Vehicles in which Seller has a security interest, Seller (A) shall have delivered to Trustee, vehicle lien applications necessary to perfect the Trust's security interest in such Vehicles, and (B) shall deliver to Trustee within ninety (90) days of the Initial Closing Date Certificates of Title with respect to such Vehicles naming Trustee as first lienholder. (b) The Pooling and Servicing Agreement, the Equipment and Lease Purchase Agreement, the Letter of Credit Reimbursement Agreement, each of the Lockbox Agreements and the Capital Contribution Agreement shall be in full force and effect. (c) Trustee or its agent shall have received, and shall hold in trust pursuant to the Pooling and Servicing Agreement, all documents, instruments and other assets required by the Pooling and Servicing Agreement to be delivered to Trustee with respect to and on behalf of the Trust as of the Initial Closing Date including an original executed counterpart of each Lease Contract identified on the Lease Contract Schedule and the related certificates of acceptance as set forth in clause (d) of the definition of "Lease File". (d) The representations and warranties of Seller in the Principal Agreements and in any Officer's Certificate delivered to Trustee, Bond Insurer or Purchaser in connection therewith shall be true and correct in all material respects on and as of the Initial Closing Date with the same effect as though such representations and warranties had been made on and as of such date, and Seller shall have complied with all the agreements and satisfied all the conditions under the Principal Agreements and the Capital Contribution Agreement in all material respects on its part to be performed or satisfied at or prior to the Initial Closing Date. (e) The representations and warranties of Rockford in the Principal Agreements and in any Officer's Certificate delivered to Trustee, Bond Insurer or Purchaser in connection therewith shall be true and correct in all material respects on and as of the Initial Closing Date with the same effect as though such representations and warranties had been made on and as of such date, and Rockford shall have complied with all the agreements and satisfied all the conditions under the Principal Agreements and the Capital Contribution Agreement in all material respects on its part to be performed or satisfied at or prior to the Initial Closing Date. (f) Seller and Rockford shall have paid or shall have made arrangements for payment of all taxes, fees and governmental charges, if any, in connection with the execution and delivery of the Principal Agreements and the assignment of other rights and interests by Seller to the Trust under this Agreement. (g) There shall have been no occurrence which would, in Purchaser's or the Controlling Party's reasonable judgment, have a material adverse effect on (i) the assets, liabilities, financial condition, business or operations of Rockford or Seller from the facts represented or warranted under the Principal Agreements, or (ii) the ability of Rockford or Seller to meet its obligations under the Principal Agreements. (h) No change shall have occurred in any law, rule or regulation that would prohibit the consummation of any transaction contemplated hereby, that would impose limits on the amount of Certificate Interest that the Certificateholders may legally receive or that would impose a tax or levy (other than tax on gross or net income, franchise tax or tax with respect to the ownership of the Certificates or the Trust Assets) on the Certificates or payments received in respect of the Certificates. (i) No action, proceeding or investigation shall have been instituted or threatened, nor shall any order, judgment or decree have been issued or proposed to be issued by any court, agency or authority to set aside, restrain, enjoin or prevent the consummation of any transaction contemplated hereby or seeking material damages against Trustee, the Trust, Purchaser or the Certificateholders in connection with the transactions contemplated by the Principal Agreements. (j) No final judgment shall have been rendered against Rockford or any of its Affiliates in an amount greater than $100,000 which is not covered by insurance or which, within 30 days after the entry of such judgment, is not discharged or execution thereof stayed pending appeal, or which is not discharged within 60 days after the expiration of such stay. (k) No event of default (or event which, with the giving of notice or the lapse of time, or both, would constitute an event of default) shall have occurred and be continuing under any loan or credit agreement given by Rockford or any of its Affiliates in connection with any single credit facility extended to Rockford or any of its Affiliates which has at the time an outstanding principal balance of $100,000 or more. (l) Not more than one of the persons who hold the offices of President or Executive Vice President of Rockford on the date of this Agreement shall have ceased to be employed on a full-time basis by Rockford. (m) The Net Worth Requirement shall be satisfied. (n) Seller or Rockford shall pay or reimburse Bond Insurer for all costs and expenses incurred by Bond Insurer in connection with the Principal Agreements and the transactions contemplated thereby. (o) The Rating Agencies shall have notified Bond Insurer that the Rating Agencies have deemed the Certificates an "investment grade risk" to Bond Insurer. (p) Bond Insurer shall have delivered the Policy to Trustee. (q) Bond Insurer shall have received evidence that Trustee has received the Letter of Credit and that the Available LOC Amount equals the Minimum LOC Amount. If any of the conditions specified in this Section 2.02 shall not have been ------------ fulfilled when and as provided by this Agreement, or if any of the opinions, certificates or other documents mentioned above or elsewhere in this Agreement shall not be satisfactory in form and substance to Purchaser and Purchaser's special counsel, and Bond Insurer and Bond Insurer's special counsel, this Agreement and all Purchaser's obligations hereunder may be canceled by Purchaser at or at any time prior to, the Initial Closing Date. Notice of such cancellation shall be given to Seller and Bond Insurer in writing, or by telephone or telecopy confirmed in writing. Such cancellation shall be without prejudice to any rights, claims or remedies that Purchaser may have pursuant to this Agreement or otherwise against Seller or any other person by reason of such cancellation. Section 2.03 Closings. -------- (a) Subject to the terms and conditions set forth herein, on the Initial Closing Date (with respect to the Existing Trust Assets) and on each Subsequent Closing Date (with respect to the other Eligible Lease Contracts and other rights and interests to be conveyed to the Trust on such Subsequent Closing Date): (i) Seller shall assign to Trustee (or, with respect to the Eligible Lease Contracts constituting Existing Trust Assets, reconfirm its prior assignment to Trustee), for the benefit of the Certificateholders and Bond Insurer, the Eligible Lease Contracts and other rights and interests to be conveyed or reconveyed to the Trust on such Closing Date, (ii) Rockford shall cause the Available Amount to equal or exceed the Minimum LOC Amount (calculated after giving effect to the conveyance of the Lease Contracts to be conveyed to the Trust and the issuance of the related Class A Certificates and Class B Certificates on such Closing Date), (iii) Trustee shall issue to or upon the order of Seller Class A Certificates and Class B Certificates having an original aggregate certificate principal balance equal to the Aggregate Discounted Lease Contract Balance of such Lease Contracts as of such Closing Date, representing 100% of the Certificates to be issued on such Closing Date, and (iv) Purchaser and/or its designated affiliate shall purchase such Class A Certificates and Class B Certificates from Seller for a price equal to the original aggregate principal amount of such Certificates, except that the Consolidated Certificates to be issued on the Initial Closing Date shall be issued solely in exchange for the transfer and assignment of the Existing Certificates to Seller; provided, -------- however, that (A) the purchase of Certificates on any Subsequent Closing Date - ------- other than the Consolidated Certificates to be issued on the Initial Closing Date (collectively, the "New Certificates") shall not result in the sum of (1) ---------------- aggregate initial principal balance of all New Certificates issued on such Subsequent Closing Date, plus (2) the aggregate initial principal balance of all ---- New Certificates issued on each prior Subsequent Closing Date, to exceed the Available Commitment Amount, unless Purchaser consents thereto in writing (in its sole discretion), and (B) the purchase of such New Certificates shall not cause the then Class A Certificate Investor Interest (after giving effect to the issuance of Class A Certificates on such Subsequent Closing Date) to exceed $250,000,000. Trustee shall not accept further Lease Contracts if to do so would result in a violation of clause (A) or (B) of this Section 2.03(a). If --------------- Purchaser elects (in its sole discretion) to increase the Available Commitment Amount, then Purchaser shall provide written notice to such effect (which notice shall state the increased Available Commitment Amount) to Bond Insurer, Trustee, Seller and Rockford, and the term "Available Commitment Amount" shall thereafter be deemed changed to such increased amount. The Existing Certificates transferred and assigned to Seller in exchange for the Consolidated Certificates be issued on the Initial Closing Date shall thereafter be deemed canceled, void and of no further force or effect. The Consolidated Certificates shall be issued by the Trust in order to amend, consolidate and completely restate, and to evidence the indebtedness outstanding under and be a substitute and replacement for, the Existing Certificates, but shall not intended and shall not be deemed or construed to be a payment, satisfaction, cancellation or novation of any of the liabilities or obligations of the Trust or any of the Existing Trusts under the Existing Certificates. Notwithstanding anything to the contrary contained herein, all Subsequent Closing Dates must occur no later than the date on which the Funding Period is terminated. Trustee shall not accept Lease Contracts and Purchaser shall not purchase Certificates on or after the date on which the Funding Period is terminated. (b) Not later than the 11:00 a.m. Houston Time, on the third Business Day preceding a Subsequent Closing Date, Seller, by personal delivery, telecopy or other means of delivery, shall give Trustee, the Controlling Party and Purchaser notice (the "Subsequent Closing Notice") of the proposed Subsequent Closing ------------------------- Date. Each such notice shall specify the date of the proposed Subsequent Closing Date (which shall be a Business Day), shall include a copy of the Lease Schedule for the Lease Contracts to be assigned to Trustee on the Subsequent Closing Date, and shall specify the weighted average life of such Lease Contracts, the approximate applicable Treasury Rate under Section 2.05 for such ------------ weighted average (with the precise calculation to be communicated to Trustee, the Controlling Party and Purchaser one Business Day prior to the proposed Subsequent Closing Date), and the approximate aggregate principal amount (with the precise calculation to be communicated to Trustee, the Controlling Party and Purchaser one Business Day prior to the proposed Subsequent Closing Date) and approximate applicable Certificate Rates of Certificates to be issued in connection with such proposed closing (with the precise calculation to be communicated to Trustee, the Controlling Party and Purchaser one Business Day prior to the proposed Subsequent Closing Date); provided, however, that (i) the -------- ------- issuance of New Certificates on any Subsequent Closing Date shall be subject to the limitations imposed by clauses (A) and (B) of Section 2.3(a) hereof, (ii) in -------------- no event shall the aggregate principal amount of the New Certificates to be issued in connection with such proposed closing be less than $1,000,000, and (iii) in no event shall the aggregate principal amount of all New Certificates issued during any calendar quarter be less than $10,000,000 or greater than $35,000,000. (c) Seller hereby agrees, subject to the terms of this Agreement, to assign to Trustee for the benefit of the Certificateholders and the Controlling Party on each Subsequent Closing Date, Eligible Lease Contracts with an Aggregate Discounted Lease Contract Balance as of the Subsequent Closing Date that is not less than the aggregate original principal balance of the Certificates to be issued on such Subsequent Closing Date. (d) Payment for and delivery of the Certificates to be purchased by Purchaser from Seller on a Subsequent Closing Date shall be made at a closing at the offices of Purchaser at 700 Louisiana, Suite 3905, Houston, Texas 77002 at 10:00 a.m. local time on the Subsequent Closing Date. Payment of the purchase price for the Certificates shall be made by Purchaser in federal or other immediately available funds, against delivery to Purchaser of the Certificates to be purchased on such Subsequent Closing Date, registered in Purchaser's name or in the name of Purchaser's nominee. Section 2.04 Subsequent Closing Conditions. Trustee's obligation to ----------------------------- accept Lease Contracts and issue Certificates to or upon the order of Seller on a Subsequent Closing Date and Purchaser's obligation to purchase such Certificates shall be subject to the satisfaction (or waiver by Trustee, the Controlling Party and Purchaser) on such Subsequent Closing Date of each of the conditions set forth in Section 2.03 ------------ and the following conditions precedent (references in this Section 2.04 to "Sale ------------ Assignment" and "Lease Contracts" shall be deemed to refer to the Sale Assignment to be executed by Seller in connection with such Subsequent Closing Date and the Lease Contracts covered by such Sale Assignment): (a) On or before each Subsequent Closing Date, Seller and Rockford shall deliver or cause to be delivered the following documents to Trustee, the Controlling Party and Purchaser; (i) An Officer's Certificate of Seller substantially in the form of Exhibit "C" and an Officer's Certificate of Rockford substantially in the ---------- form of Exhibit "D" (or, in either or both cases, an Officer's Certificate ----------- satisfactory to Purchaser and the Controlling Party stating that the statements made in the Officer's Certificate delivered in connection with the later of the Initial Closing Date or the most recent Subsequent Closing are true and complete as if made on and as of the Subsequent Closing Date, and that the instruments attached thereto have not been replaced or modified); (ii) [Intentionally Omitted]; (iii) [Intentionally Omitted]; (iv) [Intentionally Omitted]; (v) [Intentionally Omitted]; (vi) The Lease Schedule for the Lease Contracts and the related Lease Files; (vii) An Officer's Certificate of Servicer stating that the Lease Contracts and Lease Files have been delivered to Trustee, and that Servicer has marked the Lease Management System and other physical records of the Lease Contracts to the effect that, as to the Lease Contracts, Seller has sold and assigned all of its right, title and interest therein to the Trust; (viii) A Bill of Sale and Assignment properly executed by Rockford conveying the Lease Contracts and related Equipment to Seller; (ix) Releases and UCC-3 termination statements executed by any existing lender(s) as to the Lease Contracts and Equipment covered thereby; (x) A Sale Assignment properly executed by Seller and conveying the Lease Contracts to Trustee for the benefit of the Certificateholders and Bond Insurer (or, with respect to the Existing Trust Assets, reconfirming the prior conveyance of the Existing Trust Assets to the Trust); (xi) Secretary's Certificate of Seller covering the resolutions adopted by its Board of Directors as to the Sale Assignment and the incumbency and signatures of the officers of Seller signing the Sale Assignment; (xii) With respect to Vehicles owned by the Seller, Seller (A) shall have delivered to Trustee, Certificates of Title or Applications for Certificates of Title, and (B) shall deliver to Trustee within ninety (90) days of such Closing Date, original Certificates of Title for such Vehicles; and (xiii) With respect to Vehicles in which Seller has a security interest, Seller (A) shall have delivered to Trustee, vehicle lien applications necessary to perfect the Trust's security interest in such Vehicles, and (B) shall deliver to Trustee within ninety (90) days of such Closing Date Certificates of Title with respect to such Vehicles naming Trustee as first lienholder. (b) No Servicer Default on the part of Rockford shall have occurred and be continuing as provided (and defined) in Section 9.01 of the Pooling and ------------ Servicing Agreement, other than a Servicer Default that is waived in writing by the Controlling Party and Purchaser. (c) The Equipment and Lease Purchase Agreement, Pooling and Servicing Agreement, the Letter of Credit Reimbursement Agreement, the Lockbox Agreements, the Insurance Agreement and Capital Contribution Agreement shall remain in full force and effect. (d) Trustee shall certify that Trustee or its agent shall have received, and shall hold in trust pursuant to the Pooling and Servicing Agreement, all documents, instruments and other assets required by the Pooling and Servicing Agreement to be delivered to Trustee with respect to and on behalf of the Trust as of the Subsequent Closing Date, including the original executed counterpart of each Lease Contract identified in the related Lease Schedule. Such Lease Files shall have been delivered to the Trustee for inspection at least three Business Days before the Subsequent Closing Date. (e) The representations and warranties of Seller in the Principal Agreements and in any Officer's Certificate delivered to Trustee, the Controlling Party or Purchaser in connection therewith shall be true and correct in all material respects on and as of the Subsequent Closing Date, with the same effect as though such representations and warranties had been made on and as of such date, and Seller shall have complied with all the agreements and satisfied all the conditions under the Principal Agreements and the Capital Contribution Agreement in all material respects on its part to be performed or satisfied at or prior to the Subsequent Closing Date. (f) The representations and warranties of Rockford in the Principal Agreements and in any Officer's Certificate delivered to Trustee, the Controlling Party or Purchaser in connection therewith shall be true and correct in all material respects on and as of the Subsequent Closing Date, with the same effect as though such representations and warranties had been made on and as of such date, and Rockford shall have complied with all the agreements and satisfied all the conditions under the Principal Agreements and the Capital Contribution Agreement in all material respects on its part to be performed or satisfied at or prior to the Subsequent Closing Date. (g) Seller and Rockford shall have paid or shall have made arrangements for payment of all taxes, fees and governmental charges, if any, in connection with the sale of the Lease Contracts and related Equipment by Rockford to Seller under the Equipment and Lease Purchase Agreement, the assignment of the Lease Contracts and its interest in the Equipment and other rights and interests by Seller to the Trust under this Agreement and the issuance of the Certificates. (h) There shall have been no occurrence which would, in Purchaser's or the Controlling Party's reasonable judgment, have a material adverse effect on (i) the assets, liabilities, financial condition, business or operations of Rockford or Seller from the facts represented or warranted under the Principal Agreements, or (ii) the ability of Rockford or Seller to meet its obligations under the Principal Agreements. (i) No change shall have occurred in any law, rule or regulation that would prohibit the consummation of any transaction contemplated hereby, that would impose limits on the amount of Certificate Interest that the Certificateholders may legally receive or that would impose a tax or levy (other than tax on gross or net income, franchise tax or tax with respect to the ownership of the Certificates or the Trust Assets) on the Certificates or payments received in respect of the Certificates. (j) No action, proceeding or investigation shall have been instituted or threatened, nor shall any order, judgment or decree have been issued or proposed to be issued by any court, agency or authority to set aside, restrain, enjoin or prevent the consummation of any transaction contemplated hereby or seeking material damages against Trustee, the Trust, Purchaser, Bond Insurer or the Certificateholders in connection with the transactions contemplated by the Principal Agreements. (k) Seller shall have delivered to Trustee, the Controlling Party and Purchaser an Officer's Certificate of Seller and Servicer confirming (i) the deposit in the Investment Account of all funds received with respect to the Lease Contracts from the applicable Cut-Off Date to the Subsequent Closing Date, and (ii) that the Available Amount equals or exceeds the Minimum LOC Amount (calculated after giving effect to the conveyance of the Lease Contracts to be conveyed to the Trust and the issuance of the related Class A Certificates and Class B Certificates on such Subsequent Closing Date), and Trustee shall have delivered to Purchaser and the Controlling Party a certificate of a Responsible Officer confirming the amounts so indicated by Seller and Servicer in such Officer's Certificate. (l) No final judgment shall have been rendered against Rockford or any of its Affiliates in an amount greater than $100,000 which is not covered by insurance or which, within 30 days after the entry of such judgment, is not discharged or execution thereof stayed pending appeal, or which is not discharged within 60 days after the expiration of such stay. (m) No event of default (or event which, with the giving of notice or the lapse of time, or both, would constitute an event of default) shall have occurred and be continuing under any loan or credit agreement given by Rockford or any of its Affiliates in connection with any single credit facility extended to Rockford or any of its Affiliates which has at the time an outstanding principal balance of $100,000 or more. (n) The cumulative Discounted Lease Contract Balance of all Lease Contracts under which the Equipment consists of Vehicles shall not exceed 7% of the Aggregate Discounted Lease Contract Balance. (o) The Net Worth Requirement shall be satisfied. (p) Seller or Rockford shall pay or reimburse Purchaser and Bond Insurer for all unreimbursed or unpaid costs and expenses incurred by Purchaser in connection with the Principal Agreements and the transactions contemplated thereby. (q) Purchaser and the Controlling Party shall have received a true and complete copy of Rockford's and Seller's most recent financial statements (whether or not audited). (r) No more than 2.5% of the Aggregate Discounted Lease Contract Balance is attributable to Lease Contracts with Lessees located in Puerto Rico, and no more than 2.0% of the Aggregate Discounted Lease Contract Balance is attributable to Lease Contracts with Lessees located in Canada. (t) An Event of Bankruptcy shall not have occurred with respect to Seller or Rockford. (u) A Servicer Default with respect to Rockford shall not have occurred and be continuing (unless such Servicer Default has been waived in writing by the Controlling Party, or by Purchaser with the prior written consent of the Controlling Party), and the Commitment Expiration Date shall not have occurred. (v) The sum of the Class A Certificate Investor Interest and Class B Certificate Investor Interest shall not be greater than the Aggregate Discounted Lease Contract Balance. (w) Seller and Rockford shall have maintained a first priority perfected security interest in the Lease Receivables and the Lease Files for the benefit of Certificateholder and Bond Insurer. (z) Neither the Certificateholders nor Trustee shall have received a letter from the Controlling Party confirming that the Policy no longer remains in full force and effect as of the related Closing Date. (aa) There shall have been no downgrading of the rating of the Class B Certificates by any Rating Agency. (bb) The Controlling Party shall have received such other documents, certificates and opinions as it shall have requested including without limitation, no more often than semi-annually, Opinions of Counsel, copies of which shall be delivered to each of the Rating Agencies, with respect to the treatment of transfers from Rockford to Seller as a "true sale," certain bankruptcy issues with respect to Seller and its Affiliates and the perfected first priority security interest of Trustee in Lease Contracts. (cc) Not more than one of the persons who hold the offices of President or Executive Vice President of Rockford on the Initial Closing Date shall have ceased to be employed on a full-time basis by Rockford. Section 2.05 Determination of Certificate Rates. The Certificate Rate for ---------------------------------- the Class A Certificates issued on the Initial Closing Date shall be 7.703895% per annum (calculated on the basis of a 360 day year). The Certificate Rate for the Class B Certificates issued on the Initial Closing Date shall be 8.353885 per annum (calculated on the basis of a 360 day year). The Certificate Rate for the Class A Certificates issued on any Subsequent Closing Date shall be a per annum rate (calculated in each case on the basis of a 360 day year) equal to the Treasury Rate plus 1.10%. The Certificate Rate for the Class B Certificates issued on any Subsequent Closing Date shall be a per annum rate (calculated in each case on the basis of a 360 day year) equal to the Treasury Rate plus 1.75%. As used in this Agreement, the term "Treasury Rate" shall mean, with respect to ------------- any Closing Date, the average of the rates shown in the "Treasury Bonds, Notes & Bills" section of the then most recently published edition of The Wall Street Journal under the column "Ask Yld." for United States Treasury bonds and notes maturing during the month (the "Reference Month") corresponding to the end of --------------- the weighted average life (based on the Lease Contract Balances of the Lease Contracts assigned on such Closing Date as of the Cut-Off Date applicable to such Closing Date) of the remaining terms of the Lease Contracts assigned to the Trust on the Subsequent Closing Date; provided, -------- however, that if there are no quotes for bonds and notes with such maturity, - ------- then the Treasury Rate shall be one-half of the sum of (a) the average of such rates for bonds and notes maturing in the first month following the Reference Month for which such rates are published in such edition of The Wall Street Journal, plus (b) the average of such rates for bonds and notes maturing in the first month preceding the Reference Month for which such rates are published in such edition of The Wall Street Journal. Quotes for bonds and notes callable prior to maturity shall not be included in determining the Treasury Rate. The weighted average of the remaining terms of the Lease Contracts to be assigned to the Trust on the Closing Date and the applicable Treasury Rate shall be specified by the Seller in its Subsequent Closing Notice; provided, however, -------- ------- that such weighed average life shall not be less than 24 months or greater than 36 months. Section 2.06 Intent of the Parties. Except as provided in and subject to --------------------- Section 10.14, it is the intention of the parties to this Agreement that the - ------------- conveyance of Seller's right, title and interest in and to the Lease Contracts pursuant to this Agreement shall constitute a purchase and sale and not a loan. If, notwithstanding the foregoing, the conveyance of the Lease Contracts to Trustee for the benefit of the Certificateholders is characterized by any third party as a pledge, the parties intend that Seller shall be deemed hereunder to have granted to Trustee, for the benefit of the Certificateholders, a first priority perfected security interest in all of Seller's right, title and interest in, to and under the Lease Contracts, Equipment and other rights, titles and interests covered by the Sale Assignments and all monies due or to become due with respect thereto after the Cut-Off Date, and all proceeds of any of the foregoing and that this Agreement shall constitute a security agreement under applicable law. ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER Seller hereby represents and warrants to Purchaser and Bond Insurer as follows: Section 3.01 Regarding Seller. ---------------- (a) Seller was incorporated on January 25, 1995 and has transacted no business prior to the Initial Closing Date other than in preparation for the issuance of the Certificates and otherwise as permitted by its organizational documents. (b) The representations and warranties made by Seller in the Equipment and Lease Purchase Agreement, the Insurance Agreement and the Pooling and Servicing Agreement are true and correct. (c) The chief executive office and principal place of business of Seller is located in Bergen County, New Jersey. (d) There is no order or action pending, or, to the best knowledge of Seller, threatened, against Seller that has or if determined adversely might reasonably be expected to have (x) a material adverse effect on Seller's ability to perform its obligations under the Principal Agreements or any aspect of the transactions contemplated thereby, or (y) a material adverse effect on the Lease Contracts and other rights and interests to be assigned to Trustee for the benefit of the Certificateholders and Bond Insurer under the terms of this Agreement and the Pooling and Servicing Agreement. Section 3.02 Regarding the Trust Assets. As of each Subsequent Closing -------------------------- Date: (a) There is no restriction or limitation in any of the Lease Contracts or otherwise on the assignment or sale of the Lease Contracts and Equipment to Seller pursuant to the terms of the Equipment and Lease Purchase Agreement or on the assignment of the Lease Contracts and other rights and interests to Trustee pursuant to the terms of this Agreement and the Pooling and Servicing Agreement. (b) Seller owns, or will own immediately prior to the assignment of such Lease Contract to Trustee hereunder, the Equipment covered by each Lease Contract (except for any computer software included therein, for which Seller's interest is limited to a non-exclusive, transferable license) or has, or will have immediately prior to the assignment of such Lease Contract to the Trustee hereunder, a first priority perfected security interest in such Equipment. (c) With respect to each Lease Contract, only one original executed copy of such Lease Contract exists and such original has been delivered to the Trustee along with the related Lease File. (d) Each Lease Contract is genuine and in full force and effect in accordance with its terms, and nothing has occurred or failed to be performed which would or might permit any Lessee to terminate such Lease Contract or suspend or reduce any payments or obligations due or to become due in respect of such Lease Contract by reason of default by the lessor party under such Lease Contract. No Lessee in respect of a Lease Contract is the subject of a bankruptcy, insolvency or other similar proceeding. (e) There does not exist any default or delinquency in the payment of any Scheduled Payments due under any Lease Contract in excess of 30 days and there does not exist any other material default, breach, violation or event permitting acceleration, termination or repossession under any Lease Contract or any event which, with notice and the expiration of any applicable grace or cure period, would constitute such a default, breach, violation or event permitting acceleration, termination or repossession under such Lease Contract. Seller has no reason to believe that the Scheduled Payments under any Lease Contract will not be timely and fully paid. (f) All requirements of any federal, state or local law, rule or regulation, including without limitation, usury laws and any other applicable consumer credit, equal opportunity and disclosure laws, if any, applicable to each Lease Contract (including the origination, acquisition and servicing thereof) have been complied with in all material respects, and no party to any Lease Contract is in violation of any such law, rule or regulation. No Lease Contract violates any other agreement between Seller or any of its Affiliates and the Lessee thereunder. (g) Each Lease Contract has the following characteristics: (i) such Lease Contract was originated in the United States, Canada or Puerto Rico and the Scheduled Payments thereunder are payable in U.S. dollars by a Lessee domiciled in the United States, Canada or Puerto Rico; (ii) [Intentionally Omitted]; (iii) no Lessee in respect of such Lease Contract is an Affiliate of Seller or Rockford; (iv) the Lessee under such Lease Contract has unconditionally accepted the Equipment covered by such Lease Contract; (v) Scheduled Payments due under such Lease Contract on and after the Cut-Off Date are payable into the Lockbox Account; (vi) the Lessee under such Lease Contract does not have any contractual right to prepay the Scheduled Payments due under such Lease Contract; (vii) such Lease Contract is an Eligible Lease Contract and complies with all applicable laws, rules and regulations for the purposes for which the Equipment covered thereby is permitted to be used thereunder; and (viii) such Lease Contract constitutes "chattel paper" under the UCC. (h) Each Lease Contract is in full force and effect and constitutes the legal, valid, binding and legally enforceable obligation of the parties thereto, enforceable in accordance with its terms (subject to bankruptcy, insolvency and other similar laws affecting creditors' rights in general and the availability of equitable remedies). (i) Each item of Equipment is subject to a Lease Contract. (j) Other than financing statements or similar statements or instruments of registration under the law of any jurisdiction on file or registered in any public office covering any interest of any kind in the Lease Contracts or Equipment which (i) are to be terminated, released or assigned to Trustee on or prior to the Closing Date hereunder, or (ii) are to be filed pursuant to this Agreement or the Pooling and Servicing Agreement, there are no such statements or instruments on file. (k) Except as permitted by the following proviso, each Lease Contract is a lease contract having predetermined fixed rental payments due on a regular basis (without regard to any guaranteed purchase options of the respective Lessee), that are not subject to change based upon a fluctuating index or reference rate; provided, however, that: (i) not more than 15% of the Aggregate Discounted - -------- ------- Lease Contract Balance may be Deferred Leases; (ii) not more than 10% of the Aggregate Discounted Lease Contract Balance may be Step Leases under which the Lessee is not required to begin to make equal Scheduled Payments thereunder until the thirteenth (13th) month immediately following the commencement date thereof; (iii) not more than 50% of the Aggregate Discounted Lease Contract Balance may be Deferred Leases and Step Leases; (iv) with respect to the Lease Contracts relating to any particular increase in the outstanding principal balance of the Class A Certificates, (A) the Aggregate Discounted Lease Contract Balance of all Deferred Leases relating to such increase may not exceed 20% of the Aggregate Discounted Lease Contract Balance of all Lease Contracts relating to such increase, and (B) the Aggregate Discounted Lease Contract Balance of all Step Leases relating to such increase may not exceed 30% of the Aggregate Discounted Lease Contract Balance of all Lease Contracts relating to such increase; and (vi) not less than 80% of the Aggregate Discounted Lease Contract Balance shall consist of Lease Contracts under which at least one Scheduled Payment (including, without limitation, any advance rental payment or other initial up-front payment, or any billed payment) has been made under such Lease Contract, in an amount equal to the first "non-zero" payment thereunder. (l) The Lessee under each Lease Contract is personally liable for the payment and performance of its obligations in respect of such Lease Contract. Pursuant to the terms of each Lease Contract, as of the Cut-Off Date the Lessee under each Lease Contract will be absolutely required to make to Trustee all payments (including, without limitation, all Scheduled Payments under such Lease Contract in respect of periods on and after the Cut-Off Date) and perform all obligations under such Lease Contract without abatement, deferment or defense of any kind or for any reason. No Lease Contract is subject to any right of claim, rescission, set-off, counterclaim, recoupment, abatement or defense, including (without limitation) any defense of usury, nor will the operation of any of the terms of any Lease Contract or the exercise of any right or remedy thereunder render such Lease Contract or the obligations thereunder unenforceable, or subject the same to any right of claim, rescission, set-off, counterclaim, abatement or defense. No Lessee has asserted any such right of claim, rescission, set-off, counterclaim, abatement or defense to its obligations under its Lease Contract. (m) None of the Lease Contracts have been modified, amended or extended at any time (in the manner of an extension in the maturity date, a change in the amount or time of payment of any installment of rent or otherwise), no indulgences or waivers have been granted in respect of the obligations or any portion thereof of any Lessee under any Lease Contract, and none of Seller, Rockford or any Affiliate of either such party has advanced any monies on behalf of or to cure any breach or default by any Lessee. (n) Each Lease Contract requires the Lessee thereunder at its own cost and expense to maintain the Equipment leased thereunder in good repair, condition and working order during the term of such Lease Contract, and to the best of Seller's knowledge each Lessee is currently in compliance with such requirement. (o) Each Lease Contract requires the Lessee thereunder to promptly pay all fees, taxes (except income taxes), and other charges or liabilities arising with respect to the Equipment leased thereunder or the use thereof, to keep the Equipment free and clear of any and all liens, security interests and other encumbrances, to hold harmless the lessor thereunder and its successors and assigns against the imposition of any such fees, charges, liabilities and encumbrances, to bear all risk of loss associated with the Equipment covered by or securing the obligations under such Lease Contract during the term of such Lease Contract and to maintain at the cost of the Lessee public liability and casualty insurance in respect of such Equipment covered by such Lease Contract. (p) Each Lease Contract prohibits without the lessor's prior written consent any relocation of the Equipment covered by such Lease Contract and requires the Lessee thereunder to execute such agreements and documents (including without limitation any UCC-1 financing statements or amendments thereto) as may reasonably be requested by the lessor in connection with any such relocation. (q) Each of the Lease Contracts is freely assignable and none of the Lease Contracts (or any other agreement between Rockford and any Lessee) requires the consent or approval of any Lessee with respect to the sale, assignment and transfer by Rockford or Seller of their respective right, title and interest in and to such Lease Contracts and the Equipment covered thereby and Seller's grant of a security interest in the Equipment. (r) All federal, state and local sales, use, property and other similar taxes and assessments (and any fines, fees, penalties and interest thereon and other related liabilities) in respect to the Lease Contracts, any Equipment covered by or securing the obligations under the Lease Contracts, or any payments on the Lease Contracts, that have become due and payable have been paid to every applicable Governmental Authority. (s) As to each Lease Contract in respect of Equipment with an original value in excess of $50,000, the interest of Seller in respect of such Equipment covered by or securing the obligations under such Lease Contract has been duly perfected by the filing or recording in applicable jurisdictions of UCC financing statements or other documents sufficient to perfect Seller's interest in such Equipment. As to each Lease Contract in respect of a Vehicle or Vehicles, the interest of Seller in respect of such Vehicle or Vehicles has been duly perfected through delivery of vehicle lien applications necessary to protect its security interest in a Vehicle or Vehicles naming Trustee as first lienholder with respect to each Vehicle. All Equipment is located within the United States, Canada or Puerto Rico. (t) Each Lease Contract involves the lease of tangible personal property owned by Seller or the loan of money secured by a security interest in tangible personal property owned by the Lessee thereunder, except in the case of any computer software included therein, for which Seller's interest is limited to a non-exclusive, transferable license. (u) All filings and recordings required to perfect the title of Trustee to the Lease Contracts and Lease Receivables and Trustee's security interest in the Equipment (subject to Section 2.01(d) of the Pooling and Servicing Agreement) --------------- have been, or by the applicable Closing Date will be, accomplished and are, or within 10 days after the applicable Closing Date will be, in full force and effect. (v) The Scheduled Payments due under the Lease Contracts covered by this Agreement, if paid in accordance with the Lease Schedule, are in an amount adequate to pay the original principal balance of the Class A Certificates and Class B Certificates issued or to be issued under the Pooling and Servicing Agreement in connection with this Agreement and interest thereon at the respective interest rates set forth in such Certificates, the Back-up Servicer Fee, the Trustee Fee and the Servicing Fee applicable to such Lease Contracts. (w) Each Lease Contract was originated or acquired by Rockford in the ordinary course of its business and at the time of such origination or acquisition satisfied Rockford's origination criteria for equipment leases of the type of the Lease Contracts (including, without limitation, credit, type of equipment, gross receivable limitation and other criteria as set forth on Exhibit "A"). - ----------- (x) Each Lease Contract requires that the Equipment covered thereby be insured as of the Closing Date against loss by fire and such other hazards as are customary for personal property of the same or similar type, such insurance being in an amount not less than the full replacement value of such Equipment subject to customary deductions. On the related Closing Date Seller shall provide a certificate of insurance that each item of Equipment is currently insured for such loss or damage under the Servicer's blanket fire and extended coverage insurance policy and naming Seller and Trustee as loss payee, as their respective interests may appear; provided, -------- however, that no such certificate need be provided with respect to Lease - ------- Contracts for which the aggregate original cost of the Equipment covered by such Lease Contracts does not exceed $75,000. Each Lease Contract requires the Lessee to obtain and maintain public liability insurance satisfactory to Rockford, covering both personal injury and property damage arising out of or in connection with the use or operation of the related Equipment, and to name Rockford or its assignee as an additional insured on such policy. (y) The sale, transfer and conveyance by Seller of the Lease Contracts and the security interests of Seller in the related Equipment to Trustee are not a "bulk transfer" within the meaning of Article 6 of the UCC as in effect in any applicable jurisdiction. (z) Seller has not received any notice challenging its ownership or the priority of its security interest in the Equipment covered by any Lease Contract, and there are no proceedings pending before any court or Governmental Authority or threatened by any Lessee or other party, (i) asserting the invalidity of any Lease Contract, (ii) seeking to prevent payment and performance by any Lessee of any Lease Contract or any other agreement between such Lessee and Seller or Rockford, or (iii) seeking any determination or ruling that might adversely affect the validity or enforceability of any Lease Contract. (aa) As to each Lease Contract, there are no agreements or understandings between Seller or Rockford, on the one hand, and the Lessee, on the other hand, in respect of such Lease Contract or otherwise binding on Seller or Rockford other than as expressly set forth in the written instruments contained in the Lease Files. (bb) None of the Lessees is a Governmental Authority. (cc) The Lease Schedule contains a statement of the amount and number of Scheduled Payments payable by each Lessee under each Lease Contract for periods on and after the Cut-Off Date applicable to such Lease Contract together with certain other information as reflected thereon. The information set forth in the Lease Schedule is true, complete and correct in all respects. (dd) To the best knowledge of Seller, the historical delinquency and loss information set forth in Exhibit "H" is true and correct. ----------- (ee) Seller has good and legal title to each of the Lease Contracts and Equipment (except for any computer software included therein, for which Seller's interest is limited to a non-exclusive transferable license) and a first priority security interest in the Equipment, in all cases free and clear of any encumbrances and adverse claims, except for the rights of the Lessees in and to the Equipment that are expressed in and under the Lease Contracts. On or prior to each Closing Date, Seller shall deliver the Lease Contracts to Trustee and grant or assign a security interest in the Equipment to Trustee, in each case free and clear of any encumbrances and adverse claims (other than the rights described in the exception in the immediately preceding sentence), and neither Rockford nor Seller has received any notice of conflict with respect thereto that asserts the rights of others. (ff) None of Rockford, Seller or any of their Affiliates is a party to any contract for the servicing of the Lease Contracts or related Equipment, other than the Pooling and Servicing Agreement. (gg) Seller is not a party to any contract to sell or otherwise transfer any of the Lease Contracts or Equipment, other than the Principal Agreements and any purchase option rights granted to Lessees under the terms of their respective Lease Contracts as to the Equipment covered by such Lease Contract. (hh) Neither Rockford nor Seller has given any power of attorney (irrevocable or otherwise) to any Person for any purpose relating to the Lease Contracts or the Equipment, except for any power of attorney granted to any service entity that files UCC financing statements on Rockford's or Seller's behalf. (ii) Each Lease Contract, when assigned to Trustee, for the benefit of the Certificateholders and Bond Insurer, and included in the corpus of the Trust shall have been validly assigned and delivered to Trustee, for the benefit of the Certificateholders and Bond Insurer, by Seller (who immediately prior to such assignment shall own full legal and equitable title to each Lease Contract). Upon delivery to Trustee, for the benefit of the Certificateholders and Bond Insurer, of the Lease Files, and execution and delivery of Sale Assignments of all of the Lease Contracts by Seller in favor of Trustee, for the benefit of the Certificateholders and Bond Insurer, all of Seller's right, title and interest in and to the Lease Contracts shall be validly and effectively transferred to the Trust. (jj) Seller is not selling the Lease Contracts with actual intent to hinder, delay or defraud any entity to which it is or will hereafter become indebted, is not insolvent on the Closing Date and will not become insolvent as a result of such sale, is not engaged in a business or transaction, or about to engage in a business or a transaction, for which any property remaining with Seller is an unreasonably small capital, and does not intend to incur, and does not believe that it will incur, debts that would be beyond its ability to pay as such debts mature. (kk) Each Lease Contract constitutes an "eligible account" within the meaning of Rule 3a-7(b)(1) under the Investment Company Act. (ll) No Lease Contract is or has at any time been a Defaulted Lease or is then a Delinquent Lease. (mm) No Lease Contract has a Final Scheduled Payment that is more than 10% of the original cost of the Equipment covered by such Lease Contract; provided, -------- however, that (i) up to 10% of the aggregate Lease Contract Balance of all Lease - ------- Contracts having an original scheduled term of 24 months and constituting part of the Trust Assets may provide for a Final Scheduled Payment not to exceed 20% of the original cost of the Equipment covered by such Lease Contracts, and (ii) up to 10% of the aggregate Lease Contract Balance of all Lease Contracts having an original scheduled term of 36 months and constituting part of the Trust Assets may provide for a Final Scheduled Payment not to exceed 15% of the original cost of the Equipment covered by such Lease Contracts; provided, -------- further, however, that at all times the weighted average of the Final Scheduled - ------- ------- Payments of all Lease Contracts constituting part of the Trust Assets shall not exceed 10% of the original cost of the Equipment covered by all Lease Contracts then constituting part of the Trust Assets. (nn) The Discounted Lease Contract Balance of each Lease Contract: (i) when added to the aggregate of the Discounted Lease Contract Balances of all other Lease Contracts having the same Lessee as such Lease Contract and then constituting part of the Trust Assets, does not exceed the lesser of (A) $400,000 or (B) 1% of the Aggregate Discounted Lease Contract Balance; (ii) when added to the aggregate of the Discounted Lease Contract Balances of all other Lease Contracts then constituting part of the Trust Assets, would not cause the aggregate of the Discounted Lease Contract Balances of all Lease Contracts with Lessees then having the ten (10) largest Discounted Lease Contract Balances to exceed 3.5% of the Aggregate Discounted Lease Contract Balance; (iii) when added to the aggregate of the Discounted Lease Contract Balances of all other Lease Contracts then constituting part of the Trust Assets, would not cause the aggregate of the Discounted Lease Contract Balances of all Lease Contracts with Lessees then having the five (5) largest Discounted Lease Contract Balances, to exceed 2.0% of the Aggregate Discounted Lease Contract Balance; and (iv) when added to the aggregate of the Discounted Lease Contract Balances of all other Lease Contracts then constituting part of the Trust Assets, would not cause the average of the Discounted Lease Contract Balances of all Lease Contracts then constituting part of the Trust Assets to exceed $35,000. (oo) Each Lease Contract has a remaining term that is not less than 12 months and an original term of not greater than 84 months; provided, however, -------- ------- that (i) the aggregate of the Lease Contract Balances of all Lease Contracts having a remaining term greater than 72 months and then constituting part of the Trust Assets does not exceed 5% of the aggregate of the Lease Contract Balances of all Lease Contracts then constituting part of the Trust Assets, (ii) if any such Lease Contract is included in the Trust Asset, it would not cause the weighted average life of all of the Lease Contracts then constituting part of the Trust Assets to exceed 30 months, and (iii) if any such Lease Contract has a remaining term over 61 months, such Lease Contract provides for equal Scheduled Payments beginning no more than six months after the commencement date thereof, notwithstanding anything to the contrary contained in Section 3.02(k); and provided, further, however, that a Lease Contract may have - --------------- -------- ------- ------- a remaining term of less than 12 months but not less than 6 months, provided -------- that the aggregate of the Lease Contract Balances of all Lease Contracts having a remaining term of less than 12 months but not less than 6 months and then constituting part of the Trust Assets does not exceed 5% of the aggregate of the Lease Contract Balances of all Lease Contracts then constituting part of the Trust Assets. (pp) Each Lease Contract covers the leasing of Equipment to be used in the Lessee's profession, trade or business; provided, however, that the Aggregate -------- ------- Discounted Lease Contract Balance of the Lease Contracts with respect to which the related Equipment is non-medical Equipment (i.e., commercial or industrial) does not exceed 35% of the Aggregate Discounted Lease Contract Balance of all Leases constituting part of the Trust assets. (qq) Each Lease Contract meets the criteria for an "A Credit Lease" as set forth in Exhibit "A". ----------- (rr) No Lease Contract will have been selected on any basis which would cause such Lease Contract to be more likely to default than Lease Contracts in Seller's portfolio generally. (ss) No Lease Contract covers the leasing of Equipment to be used in the transportation, storage or disposal of hazardous waste. (tt) After the transfer of the Lease Receivable with respect to any Lease Contract to the Trust (and based upon the Discounted Lease Contract Balances): (i) the Lessees with respect to Equipment located in any single State will be obligated under Lease Contracts accounting for no more than 10% of the Aggregate Discounted Lease Contract Balance; provided, however, that that Lessees with -------- ------- respect to Equipment located in the States of California, New York, Florida or New Jersey, respectively, may in each case be obligated with respect to Lease Contracts accounting for no more than 25%, 20%, 15% and 15%, respectively, of the Aggregate Discounted Lease Contract Balance; (ii) Lease Contracts with respect to Equipment which consists of computer hardware, software or peripherals will account for no more than 30% of the Aggregate Discounted Lease Contract Balance; and (iii) Lease Contracts with respect to Equipment sold by any one vendor will account for no more than 10% of the Aggregate Discounted Lease Contract Balance. (uu) The Lessee under such Lease Contract shall not be liable under Lease Contracts having more than 1% of the Aggregate Discounted Lease Contract Balance of all Lease Contracts. Section 3.03 Other Representations. --------------------- (a) Seller and persons acting on its behalf have offered Class A Certificates and Class B Certificates to, or solicited offers to buy Class A Certificates and Class B Certificates from, or otherwise approached or negotiated with respect thereto with no prospective purchasers other than Purchaser. Seller has not sold, offered to sell or solicited any offer to buy, and agrees that it shall not sell, offer to sell, or solicit any offer to buy, directly or indirectly, the Certificates or any similar securities in a manner which would render the issuance or sale of the Certificates pursuant to the Principal Agreements a violation of Section 5 of the Securities Act, require registration of the Trust created by the Pooling and Servicing Agreement under the Investment Company Act, or require qualification of the Pooling and Servicing Agreement under the Trust Indenture Act of 1939 as presently in effect (the "1939 Act"), nor has Seller authorized, nor shall it authorize, any person -------- to act in such manner. (b) The written information supplied by Seller or Rockford to Purchaser or Bond Insurer in connection with the transactions contemplated by the Principal Agreements did not contain any untrue statement of a material fact or omit to state any material fact required to be stated in order to make such information not misleading. (c) No tax, assessment or other governmental charge will become payable by Purchaser or the Trust as a result of (i) the sale, assignment and transfer to the Trust of the Lease Contracts pursuant to the Principal Agreements or (ii) the sale of the Certificates to Purchaser as contemplated hereby (other than taxes imposed with respect to the exchange of the Existing Certificates for new Certificates, or otherwise upon or measured by Purchaser's or the Trust's gross or net income, franchise taxes or tax with respect to the ownership of the Certificates or the Trust Assets. Neither the ownership of the Certificates nor the transfer of the Lease Contracts or any other assets to the Trust shall, in and of itself, result in Purchaser becoming subject to taxation or in its being deemed to be doing business in any jurisdiction in which any Lessee is located. (d) Neither Seller nor Rockford nor any of their respective officers, directors, employees or agents has employed any broker, finder or financial advisor or incurred any liability for any fees or commissions to any person in connection with the offering, issuance or sale of the Certificates except for any fees payable to Purchaser or any Affiliate thereof. Section 3.04 Reconfirmation. Seller agrees that its participation in the -------------- transactions contemplated herein and in the Equipment and Lease Purchase Agreement on each Closing Date shall constitute, without further act, a confirmation that each of its respective representations and warranties contained herein are true and correct on and as of such Closing Date as though made on and as of such Closing Date (except that the representations and warranties under Section 3.02 shall apply only to the Lease Contracts conveyed ------------ on such Closing Date and the Equipment covered thereby). ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ROCKFORD Section 4.01 Representations and Warranties. Rockford hereby represents ------------------------------ and warrants to Purchaser and the Controlling Party as follows: (a) There has been no change in the business, operations, financial condition, properties, prospects or assets of Rockford since June 30, 1997 which would have a material adverse effect on its ability to perform its obligations under the Principal Agreements. (b) The representations and warranties made by Rockford in the Pooling and Servicing Agreement and in Sections 3.01 and 3.03 of the Equipment and Lease ---------------------- Purchase Agreement are true and correct in all material respects. The representations and warranties made by Rockford in Section 3.02 of the Equipment ------------ and Lease Purchase Agreement are true and correct in all material respects. (c) Rockford and any Affiliates of Rockford who will be servicing any Lease Contracts pursuant to the Pooling and Servicing Agreement are qualified to do business, are in good standing and have obtained all necessary licenses and permits in all jurisdictions in which the conduct of their respective businesses or their activities in originating or servicing the Lease Contracts require such qualification or such licenses or permits, except where the failure to so qualify or to hold such licenses or permits would not have a material adverse effect on the transactions contemplated by the Principal Agreements or the Certificates. (d) Rockford is the beneficial owner of 100% of the shares of the voting and capital stock of Seller, subject to no claims, liens, encumbrances or interests of any kind of any person. (e) The representations and warranties of Seller under Section 7.01 of the ------------ Pooling and Servicing Agreement and under Section 3.02(dd) of this Agreement are ---------------- true and correct. (f) Rockford has the corporate power and authority to execute and deliver the Principal Agreements and to carry out its terms; and the execution, delivery and performance of the Principal Agreements have been duly authorized by Rockford by all necessary corporate action. (g) The consummation of the transactions contemplated by and the fulfillment of the terms of the Principal Agreements 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 Rockford or any material term of any material indenture, agreement, mortgage, deed of trust or other instrument to which Rockford is a party or by which it is bound, or result in the creation or imposition of any material Lien upon any of its 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 Rockford of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over Rockford or any of its properties which would have a material adverse effect on the ability of Rockford to comply with the terms of the Principal Agreements. (h) No consent, approval, authorization, order, registration, filing, qualification, license or permit of or with any Governmental Authority having jurisdiction over Rockford or any of its properties or assets is required to be obtained by or with respect to Rockford in connection with the execution, delivery and performance by Rockford of the Principal Agreements and the consummation of the transactions contemplated hereby and thereby. (i) The Principal Agreements have been duly and validly authorized, executed and delivered by Rockford and constitutes a valid and legally binding obligation of Rockford, enforceable against Rockford 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. (k) There are no proceedings or investigations pending, or, to the knowledge of Rockford, threatened, before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality (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 any determination or ruling that might materially and adversely affect the performance by Rockford of its obligations under, or the validity or enforceability, of any of the Principal Agreements. Section 4.02 Reconfirmation. Rockford agrees that its participation in -------------- the transactions contemplated herein and in the Equipment and Lease Purchase Agreement on each Closing Date shall constitute, without further act, a confirmation that each of its respective representations and warranties contained herein are true and correct on and as of such Closing Date as though made on and as of such Closing Date. ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER Section 5.01 Generally. Purchaser represents and warrants to Seller that: --------- (a) Purchaser has the power and authority to execute and deliver this Agreement and to carry out its terms. This Agreement has been duly authorized, executed and delivered by Purchaser, and constitutes a legal, valid and binding obligation of Purchaser enforceable against Purchaser in accordance with its 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. (b) Purchaser is an "accredited investor" within the meaning of Rule 501 of the Securities Act. (c) The Certificates to be purchased on each Subsequent Closing Date will be, purchased by Purchaser hereunder for Purchaser's account for investment, and not with a view to the resale thereof, it being understood, however, that the disposition of Purchaser's property shall at all times be within Purchaser's control. ARTICLE VI COVENANTS OF SELLER AND ROCKFORD Section 6.01 Generally. So long as any Certificate shall be outstanding: --------- (a) Seller shall cause Trustee to make all distributions on or with respect to such Certificates to Purchaser to the extent of the funds available in the applicable Accounts pursuant to the instructions attached hereto as Exhibit "I", together with sufficient information (including interest rate, - ------------ designation of Certificate and the issuer thereof, total payment and principal and interest portions of such payment) to identify the source of such payment including the nominee names in which the Certificate may be held. While Purchaser has the right, at any time, to change the location of the account to which payments on the Certificates should be made by giving written notice of such change to Trustee, Purchaser represents to Trustee that it has no present intention of changing such account location. (b) Each of Seller and Rockford shall deliver to Purchaser and the Controlling Party their consolidated audited annual financial statements and unaudited quarterly financial statements (prepared for the first three quarters of each fiscal year on a quarterly basis in the ordinary course of business), within a reasonable time after such statements have been prepared in final form and in any event within 45 days after the end of the period covered by such statement in the case of a quarterly statement, or within 90 days after the end of the period covered by such statement in the case of an annual statement. (c) Rockford shall not, prior to the termination of the Trust pursuant to Section 11.01 of the Pooling and Servicing Agreement, sell, assign, mortgage, - ------------- hypothecate, transfer, pledge, create a security interest in or lien on, encumber, give, place in trust (voting or other) or otherwise dispose of any or all of or any rights or entitlement deriving from the voting or capital stock of Seller, or agree to do any of the foregoing, without the prior written consent of Purchaser and the Controlling Party, which may be given or withheld at their sole discretion. (d) Rockford shall maintain its corporate existence and good standing and shall cause Seller to maintain its corporate existence and good standing, and Rockford shall not, nor shall it cause or permit Seller to, prior to the termination of the Trust pursuant to Section 11.01 of the Pooling and Servicing ------------- Agreement, amend Seller's corporate charter, liquidate or dissolve or, except in compliance with the Pooling and Servicing Agreement, consolidate with or merge into any other corporation or convey or transfer its properties and assets substantially as an entirety to any Person without the prior written consent of Purchaser and the Controlling Party, which may be given or withheld in their sole discretion. (e) Seller shall not offer or sell any Certificates or any other interests of any kind in the Trust to any Person other than Purchaser. (f) Seller and Rockford shall comply with the terms of the Equipment and Lease Purchase Agreement in all material respects, and, in the event that Rockford shall fail so to comply, Seller agrees that it shall enforce the Equipment and Lease Purchase Agreement against Rockford to the fullest extent permitted therein and by applicable law. (g) Rockford shall cause Seller to comply with the provisions of Sections -------- 8.01(c) and 8.03 of the Pooling and Servicing Agreement. - ---------------- (h) As long as no default in payment on the part of any Lessee exists under any Lease Contract, Seller will do nothing to disturb or impair such Lessee's use and quiet enjoyment of the Equipment. (i) Seller will not amend its Certificate of Incorporation or Bylaws in any manner without the approval of the Controlling Party. (j) Seller will keep in full force and effect its existence, rights and franchises as a corporation under the laws of its jurisdiction of incorporation and will preserve its qualification to do business as a foreign corporation in each jurisdiction in which such qualification is necessary to protect the validity and enforceability of any of the Lease Contracts or to permit performance of Seller's duties under the Principal Agreements. Seller shall not merge or consolidate with or sell or transfer all or substantially all of its property to any other Person. (k) Seller and Rockford will not amend or terminate the Equipment and Lease Purchase Agreement or any Lease Contract, or waive any rights or obligations of any party under such agreements. (l) Seller and Rockford will cause all Collections with respect to the Trust Assets to be paid directly the Lockbox Account and agree to hold in trust and promptly pay to the Servicer all amounts received by Seller or Rockford in respect of the Trust Assets. (m) Seller and Rockford will each 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 or Rockford may contest any act, regulation, order, decree - ------- or direction in any reasonable manner which shall not materially and adversely affect the rights of Trustee, Certificateholders or Bond Insurer (for the benefit of the Certificateholders and Bond Insurer) in the Lease Receivables and the Lease Contracts and the related Equipment. Each of Seller and Rockford will comply, in all material respects, with all requirements of law applicable to each such party. (n) Each of Seller and Rockford will not, without providing at least 30 days notice to the Trustee and the Controlling Party and without filing such amendments to any previously filed financing statements as the Trustee or the Controlling Party may require or as may be required in order to maintain the Trustee's perfected security interest in the Trust Assets (a) change the location of its principal executive office, or (b) change its name, identity or company structure in any manner which would make any financing statement or continuation statement filed by Seller or Rockford in accordance with the Pooling and Servicing Agreement or this Agreement seriously misleading within the meaning of Article 9-402(7) of any applicable enactment of the UCC. (o) At any time and from time to time upon reasonable notice during regular business hours, permit Purchaser or the Controlling Party or any of their agents or representatives, (A) to examine and make copies of and abstracts from all books, records and documents (including, without limitation, computer tapes and disks) in the possession or under the control of Seller or Rockford relating to the Lease Receivables, including, without limitation the related Lease Contracts and other agreements, and (B) to visit the offices and properties of Seller and Rockford for the purpose of examining such materials described above, and to discuss matters relating to Lease Receivables or Rockford's or Seller's performance hereunder with any of the officers or employees of Seller or Rockford having knowledge of such matters and from time to time permit Independent Public Accountants or other auditors acceptable to Purchaser and the Controlling Party to conduct a review of Seller's and Rockford's books and records relating to the Lease Receivables and the systems relating thereto. (p) Seller shall notify Purchaser and the Controlling Party of any change to the terms of the Lockbox Account or any payment instructions given to any Lessee. (q) Rockford shall not make any material change in its credit and collection policy or the Servicing Procedures and shall comply with such credit and collection policy and the Servicing Procedures including, without limitation, the filing of appropriate financing statements against the Equipment under each Lease Contract. (r) Seller and Rockford shall maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Lease Receivables in the event of the destruction of the originals thereof), and keep and maintain, all documents, books, records and other information reasonably necessary or advisable for the collection of all Lease Receivables. (t) Seller and Rockford shall deliver notice to Purchaser and the Controlling Party of any Servicer Default within two (2 ) days after such party's knowledge thereof. (u) Within 30 days after each Subsequent Closing Date, Seller shall deliver to Trustee, the Controlling Party and Purchaser file-stamped copies of all UCC-1 financing statements (with any applicable Lease Schedules annexed as exhibits thereto) and UCC-3 assignments described in Exhibit F" or other ---------- instruments necessary to perfect the first priority ownership or security interests granted and assigned by Seller under the Principal Agreements and Sale Assignments to Trustee for the benefit of the Certificateholders and Bond Insurer in the Lease Contracts, Equipment and other rights, titles and interests referred to hereunder (other than UCC-1 financing statements naming the Lessees under the Lease Contracts as debtors) to be filed or recorded in all such appropriate places as are required to protect the Trust's interest in the Lease Contracts, Equipment and such other rights, titles and interests. (v) Seller shall promptly deliver to Purchaser and the Controlling Party copies of all reports and registration statements filed by Seller or any Affiliate of Seller with the Securities and Exchange Commission. ARTICLE VII REPURCHASE OBLIGATION Section 7.01 Repurchase Upon Breach of Certain Representations and ----------------------------------------------------- Warranties. - ---------- (a) The representations and warranties of Seller set forth in Section 3.02 ------------ with respect to each Lease Contract and related Equipment shall continue so long as such Lease Contract remains outstanding. Upon discovery by Seller, Rockford, the Controlling Party or Trustee that any of such representations or warranties with respect to any Lease Contract and related Equipment were incorrect as of the time made, the party making such discovery shall give prompt notice to the other parties hereto and the Controlling Party. In the event any breach of a representation or warranty with respect to any Lease Contract and related Equipment materially and adversely affects the interest of the Certificateholders or Bond Insurer in such Lease Contract and related Equipment or the value of such Lease Contract and related Equipment, as determined by Rockford, Purchaser, Bond Insurer or the Majority Certificateholders and set forth in an Officer's Certificate, Seller shall eliminate or cure the circumstance or condition causing the defect within 30 days (or such longer period as Trustee may in its discretion consent to) after the discovery thereof or repurchase such Lease Contract and the security interest in the Equipment covered by such Lease Contract. In addition, in the event that (i) the Lessee under any Lease Contract constituting part of the Trust Assets fails to pay the first billed Scheduled Payment within 30 days after it is due under such Lease Contract and (ii) such Lease Contract subsequently becomes a Defaulted Lease Contract, Seller shall repurchase such Lease Contract and the security interest in the Equipment covered by such Lease Contract on the immediately succeeding Payment Date. The price for any such repurchase shall be the Warranty Purchase Amount for the Lease Contract, and shall be deposited by Seller in cash in the Investment Account on the date of closing of such repurchase. (b) It is understood and agreed that the obligation of Seller to repurchase any Lease Contract as to which a breach by Seller under Section 3.02 ------------ occurred and is continuing and to make the payments which may be required by this Section 7.01 shall, together with (but without duplication) the ------------ indemnification rights contained in the Principal Agreements, constitute the sole remedies against Seller respecting such breach available to Servicer, the Trust, the Certificateholders, Bond Insurer or Trustee on behalf of the Certificateholders and Bond Insurer. (c) As used herein, the term "Warranty Purchase Amount" shall mean, with ------------------------ respect to a Lease Contract repurchased hereunder, the sum of (i) the Discounted Lease Contract Balance of such Lease Contract as of the most recent Payment Date (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 would have been able to recoup from subsequent Collections under the Lease Contract), together with interest, to the extent allowed by law, on such amount at the Discount Pool Rate for such Lease Contract through the date on which the repurchase of such Lease Contract occurs, plus (ii) the Prepayment Fee with ---- respect to such Lease Contract. Section 7.02 Release of Lease Contract. Upon notification from Seller and ------------------------- confirmation by Trustee that the Warranty Purchase Amount for a Lease Contract has been deposited in the Investment Account, Trustee shall release to Seller the related Lease Files and shall execute and deliver such instruments of transfer or assignment of such Lease Contract and the security interest in the related Equipment, in each case without recourse, representation or warranty, as Seller shall reasonably request (as shall be prepared by and at the expense of Seller). ARTICLE VIII GRANT OF SECURITY INTEREST Section 8.01 Grant of Security Interest. To secure the performance of -------------------------- Seller's obligations hereunder and in addition, in furtherance of the sale and transfer contemplated hereunder, Seller, pursuant to each Sale Assignment, assigns and grants to Trustee, for the benefit of the Certificateholders and Bond Insurer, a first priority lien and security interest in all right, title and interest of Seller in and to each item of Equipment subject to each Lease Contract and certain other collateral described therein. ARTICLE IX INDEMNITY Section 9.01 Indemnities. ----------- (a) Seller shall defend and hold harmless, and hereby indemnifies, Trustee (except to the extent the following result from the gross negligence or willful misconduct of Trustee), the Trust, Bond Insurer, Purchaser and the Certificateholders from and against any taxes that may at any time be asserted against Trustee, the Trust, Purchaser or the Certificateholders or their respective directors, officers, employees and agents, with respect to (i) the execution and delivery of the Principal Agreements, (ii) the issuance of the Certificates, (iii) the depositing of funds into the Cash Collateral Account, and (iv) the sale, transfer and assignment of Lease Contracts and other rights and interests to Trustee for the benefit of the Certificateholders, including, without limitation, any sales, gross receipts, general corporation, tangible or intangible personal property, privilege, or license taxes (but not including any taxes asserted with respect to ownership of the Certificates or the Trust Assets, gross or net income or franchise taxes arising out of the transactions contemplated by the Principal Agreements), and reasonable out-of-pocket costs and expenses in defending against the same. (b) Seller shall defend and hold harmless, and hereby indemnifies, Trustee, Bond Insurer, the Trust, Purchaser and the Certificateholders, and their respective directors, officers, employees and agents, from and against any loss, liability or expense incurred by reason of (i) Seller's willful misfeasance, bad faith, or negligence in the performance of its duties under the Principal Agreements; (ii) any action taken or failed to be taken as required by the terms of the Principal Agreements or the Lease Contracts, by Seller in respect of any of the Lease Contracts or Equipment, (iii) the failure of Seller to sell the Class A Certificates and Class B Certificates designated in a Subsequent Closing Notice to Purchaser after delivery of such Subsequent Closing Notice, (iv) the commingling of the funds of the Trust with the funds of any other party, (v) failure to maintain insurance in accordance with Rockford's policies, or (vi) the failure of Seller or Rockford to pay any taxes when due. (c) Seller shall defend and hold harmless, and hereby indemnifies, Trustee, the Trust, Purchaser, Bond Insurer and the Certificateholders, from and against any and all loss, liability, damage, judgment, claim, deficiency or expense that arises out of or is based upon (i) a breach at any time by Seller of its representations, warranties and covenants contained in the Principal Agreements or the Lease Contracts, (ii) any information certified in any schedule or other writing delivered by Seller hereunder, being untrue in any respect when any such representation was made or schedule delivered, or (iii) any act or omission in respect of a Lease Contract or its related Equipment occurring prior to the Closing Date on which the Lease Contract became a Trust Asset; provided, however, that Seller shall not be so required to indemnify Trustee, the Trust, Purchaser and the Certificateholders for or on account of or arising from or in connection with any breach of a representation or warranty a remedy for the breach of which is provided in Article VII, except in respect of claims, demands ----------- and causes of action of Lessees, Governmental Agencies, or other third parties (d) Seller shall also indemnify, defend and hold harmless Trustee, the Trust, Purchaser, Bond Insurer and the Certificateholders and their respective directors, officers, employees and agents, from and against any loss, liability or expense incurred by reason of the violation by any of such parties of federal or state securities laws in connection with the sale of the Certificates, to the extent such violation results from (i) any information furnished by or on behalf of Seller that in turn was furnished to the Certificateholders, or (ii) the failure of Seller to furnish to Purchaser any information known by any officer or agent of Seller and that was not otherwise known by any officer or agent of Purchaser or any of its Affiliates. (e) THE INDEMNITIES OF SELLER UNDER THIS SECTION 9.01 SHALL APPLY ------------ NOTWITHSTANDING THAT A CLAIM, DEMAND, LIABILITY, LOSS, COST OR EXPENSE IS ATTRIBUTABLE IN WHOLE OR IN PART TO THE NEGLIGENCE OF ANY OF THE INDEMNIFIED PARTIES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW. (f) Indemnification under this Section 9.01 shall include reasonable out- ------------ of-pocket fees and expenses of counsel and expenses of litigation, shall survive the execution, delivery and performance of this Agreement regardless of any investigation made by the indemnified parties or any other Person, and shall also survive termination of the Trust or the repurchase of a Lease Contract. Payment of any amounts from the Seller under this Section 9.01 shall be solely ------------ from amounts distributed to the Seller pursuant to Section 4.08(b)(xv) of the Pooling and Servicing Agreement. If Seller shall have - ------------------- made any indemnity payments to Trustee, Purchaser, the Trust and the Certificateholders pursuant to this Section 9.01 and Trustee, Purchaser, the ------------ Trust and the Certificateholders thereafter shall collect any of such amounts from persons other than Seller, Trustee, Purchaser, the Trust or the Certificateholders, as the case may be, and shall promptly upon receipt thereof repay such amounts to Seller, without interest. ARTICLE X MISCELLANEOUS Section 10.01 Expenses. Whether or not the transactions contemplated by -------- the Principal Agreements shall be consummated, Seller and Rockford shall pay and reimburse Purchaser and Bond Insurer for Purchaser's and Bond Insurer's cost and expenses incurred in connection with such transactions, including without limitation, (i) Purchaser's reasonable out-of-pocket cost and expenses incurred in preparing and reproducing the Principal Agreements and the Certificates, including attorneys' fees and expenses, (ii) the reasonable out-of-pocket cost of Purchaser's performance of and compliance with all agreements and conditions contained in the Principal Agreements to be performed or complied with by Purchaser (including collateral audit fees for up to one year (or thereafter, if a Servicer Default has occurred)) and (iii) Bond Insurer's actual out-of- pocket expenses, including attorneys' fees and expenses not to exceed $30,000 and audit fees. Payment of any amounts from the Seller under this Section 10.01 ------------- shall be solely from amounts distributed to the Seller pursuant to Section ------- 4.08(b)(xv) of the Pooling and Servicing Agreement. - ----------- Section 10.02 Survival. Each of the parties agrees that the -------- representations, warranties and agreements made by it herein and in any certificate or other instrument delivered pursuant hereto shall be deemed to be relied upon by the other parties hereto, notwithstanding any investigation heretofore or hereafter made by any such other party or on its behalf, and that the representations, warranties and agreements made by each of the parties hereto herein or in any such certificate or other instrument shall survive the delivery and payment for the Certificates. The provisions of this Section 10.02 ------------- shall survive any termination or cancellation of this Agreement. Section 10.03 [Intentionally Omitted.] --------------------- Section 10.04 [Intentionally Omitted.] --------------------- Section 10.05 Governing Law; Counterparts. This Agreement is to be ---------------------------- governed by, and interpreted, construed and enforced in accordance with, the internal law of the State of New York without regard to principles of conflicts of laws. This Agreement may be executed in two or more counterparts, each of which when so executed and delivered shall be an original, but all of which together shall constitute one and the same instrument. Section 10.06 Amendments. This Agreement or any term hereof may not be ---------- changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the parties hereto and with the prior written consent of the Controlling Party. Trustee shall promptly provide a copy of any amendment to this Agreement to each Rating Agency. Section 10.07 Headings. The headings in this Agreement are for purposes -------- of reference only and shall not limit or otherwise affect the meaning hereof. Section 10.08 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 (a) when delivered against receipt of registered or certified mail or upon actual receipt of registered or certified mail, postage prepaid, return receipt requested; (b) when delivered by courier with appropriate evidence of receipt; or (c) upon transmission via facsimile transmission with appropriate evidence of receipt at the following address of the recipient: (i) in the case of Seller, at 10 Mountainview Road, Suite 103, South Wing, Upper Saddle River, New Jersey 07458, (ii) in the case of Rockford, at 1851 East First Street, Suite 600, Santa Ana, California 92705, (iii) in the case of Trustee, at the Corporate Trust Office, (iv) in the case of Purchaser, at c/o SunAmerica Life Insurance Company, 700 Louisiana, Suite 3905, Houston, Texas 77002, Attn: Mr. Tom Denkler, and (v) in the case of Bond Insurer, at 885 Third Avenue, New York, New York 10022, Attention: Head of Exposure Management or Senior Risk Officer. 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 10.08 for giving notice and by otherwise complying with any ------------- applicable terms of this Agreement. Section 10.09 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 or Bond Insurer thereof. Section 10.10 Assignment. This Agreement may not be assigned by Seller or ---------- Rockford without the prior consent of the Majority Certificateholders and Bond Insurer. Subject to the foregoing, this Agreement shall inure to the benefit of, and be binding on, the parties hereto, and their successors and assigns. Section 10.11 Further Assurances. Seller and Rockford 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 Trustee, the Controlling Party or Purchaser 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 10.12 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 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 10.13 Third-Party Beneficiary. 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 10.14 Intention of Parties. This Agreement and the transactions -------------------- contemplated by the Pooling and Servicing Agreement have been structured with the intention that they will be treated as a financing transaction (and not a sale of the Trust Assets by either Rockford or Seller) for tax purposes, including federal, state and local income and franchise taxes and any other tax imposed on or measured by income, and that the Certificates will be treated as indebtedness. Seller, Rockford and Purchaser agree to take no action inconsistent with the treatment of such transactions as a financing transaction and the Certificates as indebtedness for tax purposes. The function of Seller and the Trust is to provide for the segregation of the Trust Assets and to provide a mechanism for using such assets and the proceeds thereof for the payment of principal and interest on the Certificates. For tax purposes, Seller and the Trust serve merely as a nominee for Rockford. Except as expressly provided in this Agreement or in the Pooling and Servicing Agreement or the Equipment and Lease Purchase Agreement, neither Seller nor the Trust shall engage in any business or other activity. Section 10.15 Non-Petition Covenant. Seller, Rockford, Bond Insurer, --------------------- Trustee and Purchaser each hereby covenants and agrees that, prior to the date that is one year and one day after the payment in full of the Certificates, it will not institute against, or join any other Person or entity in instituting against, the Trust, Seller or Purchaser, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding, or other proceeding under any federal or state bankruptcy or similar law. Section 10.16 Bond Insurer Default. If a Bond Insurer Default occurs and -------------------- is continuing, 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 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 10.17 Limited Recourse. Purchaser agrees that Certificates shall ---------------- be limited recourse obligations of Seller payable solely from Trust Assets in accordance with the Pooling and Servicing Agreement. Bond Insurer, Rockford, Seller and Trustee each agree that the obligations of Purchaser hereunder shall be limited recourse obligations of Purchaser payable solely from funds payable to Purchaser as holder of the Class A Certificates and Class B Certificates in accordance with the Pooling and Servicing Agreement. - REMAINDER OF PAGE INTENTIONALLY LEFT BLANK - IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. ROCKFORD LIMITED I By: Name: Larry Hartmann Title: President ROCKFORD INDUSTRIES, INC. By: Name: Gerry J. Ricco Title: President TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Trustee By: Name: Title: SUNAMERICA LIFE INSURANCE COMPANY By: Name: Title: EXHIBITS A Description of "A" Credit Lease Criteria B Form of Sale Assignment C Form of Officer's Certificate (Seller) D Form of Officer's Certificate (Rockford) E Form of Opinions of Counsel for Seller and Rockford F UCC Filing Requirements G Capital Contribution Agreement H Historic Delinquency and Loss Data I Certificate Payment Instructions J UCC Searches EX-10.42 8 1ST AMEND. TO AMEND. POOLING & SERVICING AGREEMENT EXHIBIT 10.42 FIRST AMENDMENT TO AMENDED, RESTATED AND CONSOLIDATED POOLING AND SERVICING AGREEMENT First Amendment, dated as of April 8, 1998, by and among ROCKFORD LIMITED I, a New York corporation (the "Seller"), ROCKFORD INDUSTRIES, INC., a ------ California corporation ("Rockford" or "Servicer"), CHASE BANK OF TEXAS, N.A., -------- -------- f/k/a Texas Commerce Bank National Association (the "Trustee" or "Back-up ------- ------- Servicer") and SUN AMERICA LIFE INSURANCE COMPANY, an Arizona corporation - -------- ("SunAmerica") to the Amended, Restated and Consolidated Pooling and Servicing ---------- Agreement, dated as of August 28, 1997, by and among the Seller, Rockford, Trustee and SunAmerica (as amended to date, the "Pooling and Servicing --------------------- Agreement"). Capitalized terms used in this Agreement, and not defined herein, - --------- shall have the respective definitions provided in the Pooling and Servicing Agreement. The Seller, Rockford, Trustee and SunAmerica agree that it is in their mutual interests to modify the Pooling and Servicing Agreement as follows: NOW, THEREFORE, it is agreed: 1. In Section 1.01 of the Pooling and Servicing Agreement, the ------------ definition of "Defaulted Lease Contract" is hereby amended in its entirety to ------------------------ read as follows: "Defaulted Lease Contract" shall mean a Lease Contract ------------------------ then constituting part of the Trust Assets 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, -------- however, that each Lease Contract then constituting part of the ------- Trust Assets as to which the Lessee thereunder is delinquent in any portion of the Scheduled Payments for a period of 121 days or more shall automatically be deemed a Defaulted Lease Contract; and provided, further, however, that any Lease -------- ------- ------- Contract that becomes a Defaulted Lease Contract while it was a part of the Trust Assets shall at all times remain a Defaulted Lease Contract for purposes of this Agreement, notwithstanding that such Lease Contract is subsequently repurchased by the Seller for any reason whatsoever. 2. In Section 1.01 of the Pooling and Servicing Agreement, the ------------ definition of "Default Charge-off Ratio" is hereby amended by deleting the "(d)" ------------------------ after the words "divided by" and before the word "three", without the deletion ---------- or modification of any other material. 3. In Section 1.01 of the Pooling and Servicing Agreement, the ------------ definition of "Equipment" is hereby amended in its entirety to read as --------- follows: "Equipment" shall mean all equipment and/or other personal --------- property (including, without limitation, Vehicles and transferable computer software licenses) leased pursuant to or otherwise covered by a Lease Contract, but excluding any non- transferable computer software licenses covered thereby. 4. In Section 1.01 of the Pooling and Servicing Agreement, the ------------ definition of "Pre-Default Contract" is hereby amended in its entirety to read -------------------- as follows: "Pre-Default Contract" shall mean a Lease Contract as to -------------------- which the Lessee thereunder is delinquent in any portion of the Scheduled Payments for a period of more than 90 days but less than 121 days. 5. In Section 1.01 of the Pooling and Servicing Agreement, the ------------ following new definition is hereby added immediately after the definition of "Seller Certificate" and immediately before the definition of "Servicer": ------------------ -------- "Seriously Delinquent Contract" shall mean a Lease ----------------------------- Contract as to which the Lessee thereunder is delinquent in any portion of the Scheduled Payments for a period of more than 60 days but less than 91 days. 6. Section 2.01(d) of the Pooling and Servicing Agreement is --------------- amended by deleting the word "the" before the word "Equipment" in the eighth, ninth and tenth lines thereof, and inserting the word "such" in its place in each such line, without the deletion or modification of any other material. 7. The first sentence of Section 2.01(g) of the Pooling and --------------- Servicing Agreement is hereby amended in its entirety to read as follows: "(g) Except as otherwise provided in and subject to Section 12.14 hereof, the parties hereto acknowledge that each ------------- transfer of Trust Assets to the Trust is intended to be (i) a sale of such Trust Assets (other than the Equipment) and not a loan, and (ii) a grant or assignment of a valid first priority perfected security interest in the Equipment (except, with respect to perfection in such Equipment, as set forth in the proviso in Section 2.01(d)), free and clear of all Liens, from 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." 8. Section 2.03(d) of the Pooling and Servicing Agreement is --------------- hereby amended to read in its entirety as follows: "(d) With respect to any Lease Contract to be prepaid or terminated early at the request of the Lessee, Seller shall be entitled either (i) to purchase such Lease Contract and the related Equipment for an amount equal to the sum of (A) the Repurchase Price with respect to such Lease Contract, plus (B) the applicable Prepayment Fee therefor, which Seller shall deposit in the Investment Account on or before 3:00 p.m. New York time on the Tuesday or Thursday next succeeding the date of such prepayment or early termination, whichever day shall occur first (or if such Tuesday or Thursday is not a Business Day, on the Business Day immediately following such day), or (ii) to deliver a Substitute Lease Contract therefor meeting the Substitution Criteria; provided, however, that subject to -------- ------- Section 2.03(g) hereof the cumulative Discounted Lease Contract --------------- Balance of all such Lease Contracts that are substituted for by Seller hereunder (measured as of the date of such substitution) shall not exceed 5.0 % of the Initial Aggregate Certificate Principal Balance (measured as of the date of such substitution); and provided, further, however, that subject to -------- ------- ------- Section 2.03(g) hereof the cumulative Discounted Lease Contract --------------- Balance of all Delinquent Lease Contracts, Seriously Delinquent Contracts and Pre-Default Contacts that constitute prepaid or early-terminated Lease Contracts that are purchased or substituted for by Seller hereunder (measured as of the date of such purchase or substitution) shall not exceed 1.0% of the Initial Aggregate Certificate Principal Balance (measured as of the date of such purchase or substitution)." 9. Section 2.03(g) of the Pooling and Servicing Agreement is --------------- hereby amended to read in its entirety as follows: "(g) In addition to the repurchase of Lease Contracts to be prepaid or terminated early at the request of the Lessee under Section 2.03(d) hereof, and notwithstanding any --------------- limitation on the repurchase of Lease Contracts by Seller thereunder, Seller at any time shall be entitled to repurchase any Lease Contract, together with the related Equipment, for an amount equal to the sum of (i) the Repurchase Price with respect to such Lease Contract, plus (ii) the applicable Prepayment Fee therefor; provided, however, that (A) such Lease -------- ------- Contract first became part of the Trust Assets hereunder at least sixty (60) days prior to the date of such repurchase, and (B) the aggregate Repurchase Price of all Lease Contracts repurchase by Seller under this Section 2.03(g) during any --------------- consecutive 12-month period shall not exceed $2,500,000. Seller shall deposit such Repurchase Price in the Investment Account on or before 3:00 p.m. New York time on the Tuesday or Thursday next succeeding the date of such repurchase, whichever day shall occur first (or if such Tuesday or Thursday is not a Business Day, on the Business Day immediately following such day)." 10. Section 2.04(a) of the Pooling and Servicing Agreement is --------------- hereby amended in its entirety to read as follows: "(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; (iii) upon the repurchase of a Lease --------------- Contract by Seller under Section 2.03(d) or Section 2.03(g) --------------- --------------- hereof; or (iv) upon the termination of a Lease Contract following the sale, lease or other disposition of the related Equipment; provided, however, that, in each case, Seller first delivers to Trustee and the Controlling Party 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), Section 2.03(d) or Section ------------------- --------------- ------- 2.03(g), 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 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." 11. The second sentence of Section 3.01(f) of the Pooling and --------------- Servicing Agreement is hereby amended in its entirety to read as follows: "Servicer shall not consent to any amendment to any Lease Contract which (a) would reduce, forgive, discharge or satisfy 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, in any such case, would prevent the complete amortization of the Discounted Lease Contract Balance thereof from occurring later than three (3) months after its original stated term, or (b) would result in such Lease Contract, as so amended or supplemented, no longer being an Eligible Lease Contract; provided, however, that the cumulative Discounted Lease -------- ------- Contract Balance of the Lease Contracts with respect to which Servicer agrees to any such amendment shall not exceed 1% of the Initial Aggregate Certificate Principal Balance." 12. Section 4.06(a) of the Pooling and Servicing Agreement is --------------- hereby amended by: (a) inserting the words "and/or Section 2.03(g) hereof" --------------- immediately after the words "Section 2.03(d)" and immediately before the --------------- semicolon and the word "provided" in the eleventh line thereof, without the -------- deletion or modification of any other material; and (b) by inserting the parenthetical and words "(other than a Servicer Default described in Section ------- 9.01(o) hereof)" immediately after the word "Default" and before the comma and - ------- the words "the Class A" in the thirteenth line thereof, without the deletion or modification of any other material. 13. Section 4.06(b) of the Pooling and Servicing Agreement is --------------- hereby amended by inserting the words "and/or Section 2.03(g) hereof" --------------- immediately after the words "Section 2.03(d)" and immediately before the --------------- semicolon and the word "provided", without the deletion or modification of any -------- other material. 14. Section 4.08(b)(iii) of the Pooling and Servicing Agreement is -------------------- hereby amended by deleting the words "specified for such purpose", without the deletion or modification of any other material. 15. Section 4.08(b)(xii) of the Pooling and Servicing Agreement is -------------------- hereby amended by inserting the words "(by wire transfer of funds or ACH transfer)" immediately after the word "Bank" and immediately before the comma and the words "the amount", without the deletion or modification of any other material. 16. Section 5.01(c) of the Pooling and Servicing Agreement is --------------- hereby amended by deleting the words "4.08(b)(xv)" and inserting the words ----------- "4.08(b)(xiv)" in their place, without the deletion or modification of any ------------ other material. 17. Section 9.01(g) of the Pooling and Servicing Agreement is --------------- hereby amended by inserting the words "(after giving effect to all Recoveries with respect thereto)" immediately after the word "Balances" and immediately before the word "exceeding", without the deletion or modification of any other material. 18. Section 9.01(i) of the Pooling and Servicing Agreement is --------------- hereby amended in its entirety to read as follows: "(i) there shall at any one time be (i) Seriously Delinquent Lease Contracts with Discounted Lease Contract Balances exceeding in the aggregate 2.5% of the Aggregate Discounted Lease Contract Balance, or (ii) Pre-Default Lease Contracts with Discounted Lease Contract Balances exceeding in the aggregate 1% of the Aggregate Discounted Lease Contract Balance;" 19. Section 9.01(k) of the Pooling and Servicing Agreement is --------------- hereby amended in its entirety to read as follows: "(k) there shall be a downgrading of the rating of the Class A Certificates by any Rating Agency other than solely as the result of the downgrading of the credit of the Bond Insurer;" 20 Section 9.01(l) of the Pooling and Servicing Agreement is --------------- hereby amended by deleting the word "or", without the deletion or modification of any other material. 21. In Section 9.01 of the Pooling and Servicing Agreement the ------------ following new Sections 9.01(n) and 9.01(o) are hereby added immediately after ---------------------------- Section 9.01(m) and immediately before the words "(provided, however": - --------------- ----------------- "(n) Trustee shall make a claim under the Policy in accordance with Section 4.10(a) hereof; or --------------- (o) there shall be a downgrading of the rating of the Class A Certificates by any Rating Agency solely as the result of the downgrading of the credit of the Bond Insurer." 22. This Amendment may be executed in two or more counterparts which, taken together, shall constitute a single agreement binding upon the parties hereto. As hereby amended, the Pooling and Servicing Agreement is ratified and affirmed by the Seller, the Servicer, the Trustee and Back-up Servicer and SunAmerica, all effective as of the date hereof. ROCKFORD INDUSTRIES, INC., as Servicer By: ______________________________________________________ Name: Title: ROCKFORD LIMITED I, as Seller By: _______________________________________________________ Name: Title: SUNAMERICA LIFE INSURANCE COMPANY By: ________________________________________________________ Name: Title: (Signatures continued.) (Signatures continued.) CHASE BANK OF TEXAS, N.A., f/k/a Texas Commerce Bank National Association, as Trustee and Back-up Servicer By: _______________________________________________________ Name: Title: AGREED AND ACCEPTED: - -------------------- CAPITAL MARKETS ASSURANCE CORPORATION By: _______________________________________________________ Name: Title: EX-10.43 9 1ST AMEND. TO AMEND. EQUIPMENT & LEASE AGREEMENT EXHIBIT 10.43 FIRST AMENDMENT TO AMENDED, RESTATED AND CONSOLIDATED EQUIPMENT AND LEASE PURCHASE AGREEMENT First Amendment, dated as of April 8, 1998, by and between ROCKFORD LIMITED I, a New York corporation (the "Purchaser") and ROCKFORD INDUSTRIES, --------- INC., a California corporation (the "Seller"), to the Amended, Restated and ------ Consolidated Equipment and Lease Purchase Agreement, dated as of August 28, 1997, by and between the Purchaser and the Seller (as amended to date, the "Lease Purchase Agreement"). Capitalized terms used in this Agreement, and not ------------------------ defined herein, shall have the respective definitions provided in the Lease Purchase Agreement. The Purchaser and the Seller agree that it is in their mutual interests to modify the Lease Purchase Agreement as follows: NOW, THEREFORE, it is agreed: 1. Section 3.02(b) of the Lease Purchase Agreement is hereby amended --------------- in its entirety to read as follows: "(b) Seller owns, or will own immediately prior to the sale of such Lease Contract and Equipment to Purchaser hereunder, the Equipment covered by each Lease Contract (except for any transferable computer software license included in such Equipment, for which Seller's interest is limited to a non-exclusive, transferable license) or has, or will have immediately prior to the sale of such Lease Contract and Equipment to Purchaser hereunder, a first priority perfected security interest in such Equipment." 2. Section 3.02(v) of the Lease Purchase Agreement is hereby amended --------------- in its entirety to read as follows: "(v) Each Lease Contract involves the lease of tangible personal property owned by Seller or the loan of money secured by a security interest in tangible personal property owned by the Lessee thereunder, except in such case any transferable computer software license included therein, for which Seller's or such Lessee's interest is limited to a non-exclusive, transferable license." 3. Section 3.02(gg) of the Lease Purchase Agreement is hereby ---------------- amended in its entirety to read as follows: "(gg) Seller has good and legal title to each of the Lease Contracts and Equipment (except for any transferable computer software license included in such Equipment, for which Seller's interest is limited to a non-exclusive, transferable license) and/or a first priority security interest in the Equipment in accordance with the perfection requirements of Section 2.01(d) of the Pooling and Servicing Agreement, in all cases free --------------- and clear of any encumbrances and adverse claims, except for the rights of the Lessees in and to the Equipment that are expressed in and under the Lease Contracts." 4. This Amendment may be executed in two or more counterparts which, taken together, shall constitute a single agreement binding upon the parties hereto. As hereby amended, the Lease Purchase Agreement is ratified and affirmed by the Seller and the Purchaser, all effective as of the date hereof. ROCKFORD INDUSTRIES, INC., as Seller By: _____________________ Name: Title: ROCKFORD LIMITED I, as Purchaser By: _____________________ Name: Title: (Signatures continued.) (Signatures continued.) AGREED AND ACCEPTED: - -------------------- CAPITAL MARKETS ASSURANCE CORPORATION By: __________________________ Name: Title: SUN AMERICA LIFE INSURANCE COMPANY By: __________________________ Name: Title: CHASE BANK OF TEXAS, N.A., f/k/a Texas Commerce Bank National Association, as Trustee and Back-up Servicer By: __________________________ Name: Title: EX-10.44 10 1ST AMENDMENT TO PURCHASE AGREEMENT EXHIBIT 10.44 FIRST AMENDMENT TO PURCHASE AGREEMENT First Amendment, dated as of April 8, 1998, by and among ROCKFORD LIMITED I, a New York corporation (the "Seller"), ROCKFORD INDUSTRIES, INC., a ------ California corporation ("Rockford"), SUN AMERICA LIFE INSURANCE COMPANY, an -------- Arizona corporation (the "Purchaser") and CHASE BANK OF TEXAS, N.A., f/k/a Texas --------- Commerce Bank National Association (the "Trustee") to the Purchase Agreement, ------- dated as of August 28, 1997, by and among the Seller, Rockford, Purchaser and Trustee (as amended to date, the "Purchase Agreement"). Capitalized terms used ------------------ in this Agreement, and not defined herein, shall have the respective definitions provided in the Purchase Agreement. The Seller, Rockford, Purchaser and Trustee agree that it is in their mutual interests to modify the Purchase Agreement as follows: NOW, THEREFORE, it is agreed: I. In Section 1.01 of the Purchase Agreement, the definition of ------------ "Deferred Lease" is hereby deleted in its entirety, and the two following new -------------- definitions are hereby added in its place: "Deferred A Lease" means any Lease Contract under which the ---------------- Lessee is not required to make any regular monthly equal or decreasing Scheduled Payment (or the monthly Scheduled Payments are each zero) for three months or less immediately following the commencement date of such Lease Contract; provided, however, that ----------------- once the regular monthly equal or decreasing Scheduled Payments become due and payable under such Lease Contract, such Lease Contract shall no longer constitute a Deferred A Lease. "Deferred B Lease" means any Lease Contract under which the ---------------- Lessee is not required to make any regular monthly equal or decreasing Scheduled Payment (or the monthly Scheduled Payments are each zero) for more than three months (but not more than six months) immediately following the commencement date of such Lease Contract; provided, however, that once the regular monthly -------- ------- equal or decreasing Scheduled Payments become due and payable under such Lease Contract, such Lease Contract shall no longer constitute a Deferred B Lease. I. In Section 1.01 of the Purchase Agreement, the definition of ------------ "Step Lease" is hereby deleted in its entirety, and the two following new ---------- definitions are hereby added in its place: "Step A Lease" means any Lease Contract (other than a ------------ Deferred A Lease or Deferred B Lease) under which the requirement that the Lessee make regular monthly equal or decreasing Scheduled Payments thereunder does not begin until the thirteenth (13th) month immediately following the commencement date of such Lease Contract; provided, however, that once the regular monthly -------- ------- equal or decreasing Scheduled Payments become due and payable under such Lease Contract, such Lease Contract shall no longer constitute a Step A Lease. "Step B Lease" means any Lease Contract (other than a ------------ Deferred A Lease or Deferred B Lease) under which the requirement that the Lessee make regular monthly equal or decreasing Scheduled Payments thereunder does not begin until the eighteenth (18th) month immediately following the commencement date of such Lease Contract; provided, however, that once the regular monthly -------- ------- equal or decreasing Scheduled Payments become due and payable under such Lease Contract, such Lease Contract shall no longer constitute a Step B Lease. I. Section 3.02(b) of the Purchase Agreement is amended by --------------- inserting the word "transferable" immediately after the word "any" and immediately before the word "computer", and by inserting the word "license" immediately after the word "software" and immediately before the word "included", without the deletion or modification of any other material. I. Section 3.02(k) of the Purchase Agreement is hereby amended --------------- in its entirety to read as follows: "(k) Except as permitted by the following proviso, each Lease Contract is a lease contract having regular predetermined equal or decreasing rental payments due on a monthly basis (without regard to any guaranteed purchase options of the respective Lessee), that are not subject to change based upon a fluctuating index or reference rate; provided, however, that: (i) not more -------- ------- than 20% of the Aggregate Discounted Lease Contract Balance may be Deferred A Leases; (ii) not more than 15% of the Aggregate Discounted Lease Contract Balance may be Deferred B Leases; (iii) not more than 20% of the Aggregate Discounted Lease Contract Balance may be Step A Leases; (iv) not more than 10% of the Aggregate Discounted Lease Contract Balance may be Step B Leases; (v) not more than 10% of the Aggregate Discounted Lease Contract Balance may be Lease Contracts with regular Scheduled Payments due less frequently than a monthly basis but not less frequently than an annual basis; (vi) not more than 50% of the Aggregate Discounted Lease Contract Balance may be Deferred A Leases, Deferred B Leases, Step A Leases, Step B Leases and Lease Contracts described in clause (v) hereof; (vii) with respect to the Lease Contracts relating to any particular increase in the aggregate outstanding principal balance of the Class A Certificates and Class B Certificates, (A) the Aggregate Discounted Lease Contract Balance of all Deferred B Leases relating to such increase may not exceed 20% of the Aggregate Discounted Lease Contract Balance of all Lease Contracts relating to such increase, (B) the Aggregate Discounted Lease Contract Balance of all Deferred A Leases, Deferred B Leases, Step A Leases, Step B Leases and Lease Contracts described in clause (v) hereof, relating to such increase, may not exceed 50% of the Aggregate Discounted Lease Contract Balance of all Lease Contracts relating to such increase, (C) the Aggregate Discounted Lease Contract Balance of all Step A Leases and Step B Leases relating to such increase may not exceed 30% of the Aggregate Discounted Lease Contract Balance of all Lease Contracts relating to such increase, and (D) the Aggregate Discounted Lease Contract Balance of all Lease Contracts described in clause (v) hereof relating to such increase may not exceed 15% of the Aggregate Discounted Lease Contract Balance of all Lease Contracts relating to such increase; and (viii) not less than 80% of the Aggregate Discounted Lease Contract Balance shall consist of Lease Contracts (A) under which at least one Scheduled Payment (including, without limitation, any advance rental payment or other initial up-front payment, or any billed payment) has been made under such Lease Contract, in an amount equal to the first "non-zero" payment thereunder, or (B) which are in a deferral period (i.e., the most recent regular Scheduled Payment thereunder is equal to zero)." I. Section 3.02(t) of the Purchase Agreement is hereby amended --------------- in its entirety to read as follows: "(t) Each Lease Contract involves the lease of tangible personal property owned by Seller or the loan of money secured by a security interest in tangible personal property owned by the Lessee thereunder, except in the case of any transferable computer software license covered thereby, for which Seller's or such Lessee's interest is limited to a non-exclusive, transferable license." I. The first sentence of Section 3.02(ee) of the Purchase ---------------- Agreement is hereby amended in its entirety to read as follows: "(ee) Seller has good and legal title to each of the Lease Contracts and either has good and legal title to the related Equipment (except for any transferable computer software license included therein, for which Seller's interest is limited to a non- exclusive, transferable license) or a first priority security interest in such Equipment, in all cases free and clear of any encumbrances and adverse claims, except for the rights of the Lessees in and to the Equipment that are expressed in and under the Lease Contracts." I. Section 3.02(tt) of the Purchase Agreement is hereby amended ---------------- in its entirety to read as follows: "(tt) After the transfer of the Lease Receivable with respect to any Lease Contract to the Trust (and based upon the Discounted Lease Contract Balances): (i) the Lessees with respect to Equipment located in any single State will be obligated under Lease Contracts accounting for no more than 10% of the Aggregate Discounted Lease Contract Balance; provided, however, that -------- ------- Lessees with respect to Equipment located in the States of California, New York, Florida or New Jersey, respectively, may in each case be obligated with respect to Lease Contracts accounting for no more than 25%, 20%, 15% and 15%, respectively, of the Aggregate Discounted Lease Contract Balance; (ii) Lease Contracts with respect to Equipment which consists of computer hardware, transferable or non-transferable software licenses or peripherals, will account for no more than 30% of the Aggregate Discounted Lease Contract Balance; provided, -------- however, that such Lease Contracts with respect to Equipment ------- consisting solely of transferable or non-transferable software licenses will account for no more than 10% of the Aggregate Discounted Lease Contract Balance; and (iii) Lease Contracts with respect to Equipment sold by any one vendor will account for no more than 10% of the Aggregate Discounted Lease Contract Balance." I. This Amendment may be executed in two or more counterparts which, taken together, shall constitute a single agreement binding upon the parties hereto. As hereby amended, the Purchase Agreement is ratified and affirmed by the Seller and the Purchaser, all effective as of the date hereof. ROCKFORD INDUSTRIES, INC., By: ______________________ Name: Title: ROCKFORD LIMITED I, as Seller By:_______________________ Name: Title: SUN AMERICA LIFE INSURANCE COMPANY, as Purchaser By:_______________________ Name: Title: (Signatures continued.) (Signatures continued.) CHASE BANK OF TEXAS, N.A., f/k/a Texas Commerce Bank National Association, as Trustee and Back-up Servicer By: ______________________ Name: Title: AGREED AND ACCEPTED: - -------------------- CAPITAL MARKETS ASSURANCE CORPORATION By: ______________________ Name: Title: EX-27 11 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS 9-MOS DEC-31-1998 DEC-31-1997 JUL-01-1998 JAN-01-1998 SEP-30-1998 SEP-30-1998 3,188 1,077 0 0 22,816 15,142 123 610 0 0 0 0 5,307 4,505 1,827 1,241 116,834 125,067 0 0 0 0 0 0 1,575 1,575 14,057 14,045 7,847 6,271 116,834 125,067 5,915 15,772 5,915 15,772 0 0 0 0 3,988 10,793 461 942 295 1,281 1,171 2,756 457 1,077 714 1,679 0 0 0 0 0 0 714 1,679 .17 .38 .16 .38
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