EXHIBIT 10.8
EXECUTION COPY
SERVICING AGREEMENT
Among
LFI RECEIVABLES CORPORATION,
LFI SERVICING CORPORATION,
as Master Servicer,
the Servicers Party Hereto
and
THE CHASE MANHATTAN BANK,
as Trustee
Dated as of August 5, 1996
TABLE OF CONTENTS
ARTICLE I
Definitions
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SECTION 1.01. Definitions . . . . . . . . . . . . . . 1
SECTION 1.02. Other Definitional Provisions . . . . . 1
ARTICLE II
Administration and Servicing of Receivables
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SECTION 2.01. Appointment of Master Servicer,
Servicers . . . . . . . . . . . . . . 3
SECTION 2.02. Servicing Procedures . . . . . . . . . 4
SECTION 2.03. Collections . . . . . . . . . . . . . . 6
SECTION 2.04. Reconciliation of Deposits . . . . . . 8
SECTION 2.05. Servicing Compensation . . . . . . . . 8
ARTICLE III
Representations and Warranties of the
-------------------------------------
Master Servicer and the Servicers
---------------------------------
SECTION 3.01. Organization; Powers . . . . . . . . . 10
SECTION 3.02. Authorization; No Conflict . . . . . . 10
SECTION 3.03. Enforceability . . . . . . . . . . . . 11
SECTION 3.04. Governmental Approvals . . . . . . . . 11
SECTION 3.05. Litigation; Compliance with Laws . . . 11
SECTION 3.06. Agreements . . . . . . . . . . . . . . 12
SECTION 3.07. No Servicer Default . . . . . . . . . . 12
SECTION 3.08. Servicing Ability . . . . . . . . . . . 12
SECTION 3.09. Location of Records . . . . . . . . . . 12
SECTION 3.10. Insurance . . . . . . . . . . . . . . . 12
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ARTICLE IV
Covenants of the Master Servicer
--------------------------------
and the Servicers
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SECTION 4.01. Delivery of Daily Reports . . . . . . . 13
SECTION 4.02. Delivery of Monthly Settlement
Statement . . . . . . . . . . . . . . 13
SECTION 4.03. Delivery of Annual Master Servicer's and
Servicers' Certificates . . . . . . . 14
SECTION 4.04. Delivery of Independent Public
Accountants' Servicing Reports . . . 15
SECTION 4.05. Extension, Amendment and Adjustment of
Receivables; Amendment of Policies . 15
SECTION 4.06. Protection of Certificateholders'
Rights . . . . . . . . . . . . . . . 16
SECTION 4.07. Security Interest . . . . . . . . . . . 16
SECTION 4.08. Location of Records . . . . . . . . . . 17
SECTION 4.09 Visitation Rights . . . . . . . . . . . 17
SECTION 4.10. Lockbox Agreement; Lockbox Accounts . . 18
SECTION 4.11. Delivery of Financial Statements . . . 18
SECTION 4.12. Notices . . . . . . . . . . . . . . . . 20
SECTION 4.13. Insurance . . . . . . . . . . . . . . . 20
ARTICLE V
Other Matters Relating to the Master Servicer
---------------------------------------------
and the Servicers
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SECTION 5.01. Merger, Consolidation, etc. . . . . . . 21
SECTION 5.02. Indemnification of the Trust and the
Trustee . . . . . . . . . . . . . . . 21
SECTION 5.03. Master Servicer and Servicers Not to
Resign . . . . . . . . . . . . . . . 22
SECTION 5.04. Access to Certain
Documentation and
Information Regarding the
Receivables . . . . . . . . . . . . . 23
3
ARTICLE VI
Servicer Defaults; Servicer Termination
---------------------------------------
SECTION 6.01. Servicer Defaults . . . . . . . . . . . 23
SECTION 6.02. Trustee to Act; Appointment of
Successor . . . . . . . . . . . . . . 29
SECTION 6.03. Waiver of Past Defaults . . . . . . . . 32
SECTION 6.04. Other Servicer Terminations . . . . . . 33
ARTICLE VII
Miscellaneous Provisions
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SECTION 7.01. Amendment . . . . . . . . . . . . . . . 33
SECTION 7.02. Termination . . . . . . . . . . . . . . 33
SECTION 7.03. Governing Law . . . . . . . . . . . . . 34
SECTION 7.04. Addition of Servicers . . . . . . . . . 34
SECTION 7.05. Notices . . . . . . . . . . . . . . . . 34
SECTION 7.06. Counterparts . . . . . . . . . . . . . 34
SECTION 7.07. Third-Party Beneficiaries . . . . . . . 35
SECTION 7.08. Merger and Integration . . . . . . . . 35
SECTION 7.09. Headings . . . . . . . . . . . . . . . 35
SECTION 7.10. No Set-Off . . . . . . . . . . . . . . 35
SECTION 7.11. No Bankruptcy Petition . . . . . . . . 35
Exhibit A Form of Annual Servicer's Certificate
Exhibit B Form of Agreed Upon Procedures
Exhibit C Insurance Requirements
EXECUTION COPY
SERVICING AGREEMENT, dated as of August 5,
1996, among LFI RECEIVABLES CORPORATION, a Delaware
corporation (the "Company"), LFI SERVICING CORPORATION,
a Delaware corporation, as the master servicer (the
"Master Servicer"), the servicers party hereto (the
"Servicers") and THE CHASE MANHATTAN BANK, not in its
individual capacity, but solely as trustee (in such
capacity, the "Trustee").
W I T N E S S E T H:
WHEREAS, the Company and the Sellers have entered into a Receivables
Sale Agreement, dated as of the date hereof (the "Receivables Sale Agreement");
WHEREAS, pursuant to the Receivables Sale Agreement, the Sellers sell
to the Company, and the Company purchases from the Sellers, all the Sellers'
right, title and interest in, to and under the Receivables and Related Property
(as defined in the Pooling Agreement dated as of the date hereof among the
Company, the Master Servicer and the Trustee (the "Pooling Agreement"));
WHEREAS, the parties hereto wish to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
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SECTION 1.01. Definitions. Unless otherwise defined herein,
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capitalized terms that are used herein shall
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have the meanings assigned to such terms in the Pooling Agreement and each
Supplement thereto.
SECTION 1.02. Other Definitional Provisions. (a) All terms defined
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in this Agreement (directly or by incorporation by reference pursuant to Section
1.01) shall have the defined meanings when used in any certificates 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 herein
(directly or by incorporation by reference pursuant to Section 1.01) and
accounting terms partly defined herein (directly or by incorporation by
reference pursuant to Section 1.01), to the extent not defined, shall have the
respective meanings given to them under GAAP. To the extent that the
definitions of accounting terms herein are inconsistent with the meanings of
such terms under GAAP, 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, subsection,
Schedule and Exhibit references contained in this Agreement are references to
Sections, subsections, Schedules and Exhibits in or to this Agreement unless
otherwise specified.
(d) The definitions contained herein are applicable to the singular
as well as the plural forms of such terms and to the masculine, the feminine and
the neuter genders of such terms.
(e) Where reference is made in this Agreement to the principal amount
of Receivables, such reference shall, unless explicitly stated otherwise, be
deemed a reference to the Principal Amount of such Receivables.
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(f) Any reference herein or in any other Transaction Document to a
provision of the Internal Revenue Code or ERISA shall be deemed to be also a
reference to any successor provision thereto.
(g) Any reference herein to a Schedule or Exhibit to this Agreement
shall be deemed to be a reference to such Schedule or Exhibit as it may be
amended, modified or supplemented from time to time to the extent that such
Schedule or Exhibit may be amended, modified or supplemented (or any term or
provision of any Transaction Document may be amended that would have the effect
of amending, modifying or supplementing information contained in such Schedule
or Exhibit) in compliance with the terms of the Transaction Documents.
(h) Any reference in this Agreement to any representation, warranty
or covenant "deemed" to have been made is intended to encompass only
representations, warranties or covenants that are expressly stated to be
repeated on or as of dates following the execution and delivery of this
Agreement, and no such reference shall be interpreted as a reference to any
implicit, inferred, tacit or otherwise unexpressed representation, warranty or
covenant.
(i) The words "include", "includes" or "including" shall be
interpreted as if followed, in each case, by the phrase "without limitation".
ARTICLE II
Administration and Servicing of Receivables
-------------------------------------------
SECTION 2.01. Appointment of Master Servicer, Servicers. The Company
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hereby appoints LFI Servicing Corporation and the Servicers to act as, and LFI
Servicing Corporation and the Servicers hereby accept their respective
appointments and agree to act as, Master Servicer and
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Servicers, respectively, under the Pooling and Servicing Agreements and the
Investor Certificateholders, by their acceptance of the Certificates, consent to
LFI Servicing Corporation and the Servicers acting as Master Servicer and
Servicers, respectively. Each Servicer shall have responsibility for the
management of the servicing and receipt of collections in respect of each
Receivable originated by itself as a Seller and/or by one or more of its
Affiliates as Seller(s) as identified on Schedule 1 to the Receivables Sale
Agreement (such Servicer is sometimes referred to as the "Responsible Servicer"
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with respect to any Receivable that it is responsible to service hereunder and
such a Receivable is sometimes referred to herein as a "Serviced Receivable"
-------------------
with respect to the Servicer that is responsible to service such Receivable
hereunder). Each Servicer shall have the authority to make any management
decisions relating to each Serviced Receivable to the extent such authority is
granted to such Servicer under any Pooling and Servicing Agreement. LFI
Servicing Corporation, in its role as Master Servicer, shall coordinate the
servicing of all Receivables by all Servicers. The Company, the Trustee and the
Investor Certificateholders shall treat LFI Servicing Corporation and the
Servicers as Master Servicer and Servicers, respectively, and may conclusively
rely on the instructions, notices and reports of LFI Servicing Corporation and
the Servicers as Master Servicer and Servicers, respectively, for so long as LFI
Servicing Corporation and the Servicers continue in their appointments as Master
Servicer and Servicers, respectively.
SECTION 2.02. Servicing Procedures. (a) Each Servicer shall manage
---------------------
the servicing and administration of its Serviced Receivables, the collection of
payments due under such Serviced Receivables and charging off of any such
Serviced Receivables as uncollectible, all in accordance with its Policies and
the terms of the Pooling and Servicing Agreements. Each Servicer shall have
full power and authority, acting alone or through any party properly designated
by it hereunder, to do any and all things in connection with such servicing and
administration that it
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may deem necessary or desirable, but subject to the terms of this Agreement and
the other Transaction Documents. Without limiting the generality of the
foregoing and subject to Section 6.01, each Servicer or its designee, with
respect to its Serviced Receivables, and the Master Servicer or its designee,
with respect to all Receivables, is hereby authorized and empowered (i) to
execute and deliver, on behalf of the Trust for the benefit of the
Certificateholders, any and all instruments of satisfaction or cancellation, or
of partial or full release or discharge, and all other comparable instruments,
and, after the delinquency of any such Receivable and to the extent permitted
under and in compliance with applicable Requirements of Law, to commence
enforcement proceedings with respect to such Receivable and (ii) to make any
filings, reports, notices, applications, registrations with, and to seek any
consents or authorizations from the Securities and Exchange Commission and any
state securities authority on behalf of the Trust as may be necessary or
advisable to comply with any Federal or state securities or reporting
requirements or laws.
(b) Without limiting the generality of the foregoing and subject to
Section 6.01, the Master Servicer or its designee is hereby authorized and
empowered to give written direction to the Trustee with respect to withdrawals
from, and payments to, the Collection Account in accordance with the Daily
Report and as otherwise specified in the Pooling and Servicing Agreements.
(c) Each Servicer shall, at its cost and expense and as agent for the
Company and the Trust, use its best efforts to collect, consistent with its past
practices, as and when the same becomes due, the amount owing on each Serviced
Receivable. No Servicer shall make any material change in its administrative,
servicing and collection systems that deviates from its Policies, except as
expressly permitted by the terms of any applicable Pooling and Servicing
Agreement and after giving written notice to the Trustee. In the event of
default under any Receivable, the Responsible Servicer shall have the power and
authority, on behalf of the Company and the Trust, for the benefit of the
Investor Certificateholders, to take such action in respect of such Receivable
as such Responsible Servicer may deem advisable. In the enforcement or
collection of any Receivable, the
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Responsible Servicer shall be entitled to sue thereon in (i) its own name or
(ii) if, but only if, the Company consents in writing (which consent shall not
be unreasonably withheld), as agent for the Company. In no event shall any
Servicer be entitled to take any action that would make the Company, the
Trustee, any Agent or any Investor Certificateholder a party to any litigation
without the express prior written consent of such Person.
(d) Without limiting the generality of the foregoing and subject to
Section 6.01, each Servicer is hereby authorized and empowered to delegate any
or all of its servicing, collection, enforcement and administrative duties
hereunder with respect to the Serviced Receivables to a Person who agrees to
conduct such duties in accordance with such Servicer's Policies; provided,
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however, that such Servicer shall give prior written notice to the Company, the
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Trustee, each Agent and the Rating Agencies of any such delegation relating to a
material duty prior to such delegation being effective, such Servicer shall have
received notice that the Rating Agency Condition shall be satisfied after giving
effect to such delegation and the consent of the Company, the Trustee and each
Agent to such delegation shall have been obtained. No delegation of duties by
any Servicer permitted hereunder shall relieve such Servicer of its liability
and responsibility with respect to such duties.
(e) Except as provided in any Pooling and Servicing Agreement, no
Servicer or any Successor Servicer shall be obligated to use separate servicing
procedures, offices, employees or accounts for servicing the Serviced
Receivables transferred to the Company (and, subsequently, to the Trust) from
the procedures, offices, employees and accounts used by such Servicer or such
Successor Servicer,
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as the case may be, in connection with servicing other receivables.
(f) Each Servicer shall maintain fidelity bond or other coverage
insuring against losses through wrongdoing of its officers and employees who are
involved in the servicing of the Serviced Receivables, including depositor's
forgery, in an amount and breadth of coverage satisfactory to the Rating
Agencies and each Agent. Each Servicer shall, upon reasonable prior notice, and
as often as may reasonably be requested by any Agent, provide evidence to such
Agent of such coverage.
(g) Each Servicer shall comply with and perform its servicing
obligations with respect to the Serviced Receivables in accordance with the
contracts, if any, relating to the Serviced Receivables and its Policies.
(h) No Servicer shall take any action to cause any Serviced
Receivable not evidenced by any "instrument" (as defined in the UCC as in effect
in the State of New York) upon origination to become evidenced by an instrument
and no Servicer shall take any action to cause any interest in any Receivable to
be evidenced by any title documents in bearer form, except in connection with
its enforcement or collection of a Serviced Receivable, in which event such
Servicer shall deliver such instrument or title documents to the Trustee as soon
as reasonably practicable, but in no event more than five days after execution
thereof; provided that any origination of Receivables by any Servicer, in its
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capacity as a Seller, in compliance with applicable Pooling and Servicing
Agreements shall not constitute a breach of this subsection 2.02(h).
SECTION 2.03. Collections. (a) Each Servicer shall have instructed
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all Obligors to make all payments in respect of the Serviced Receivables to a
Lockbox or a Lockbox Account. Each of the Company and each Servicer represents,
warrants and agrees that all Collections shall be collected, processed and
deposited by it pursuant to, and
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in accordance with the terms of, the Pooling and Servicing Agreements. Without
limiting the generality of the foregoing, each Servicer shall comply with the
provisions of subsection 3.01(d) of the Pooling Agreement as to remittance of
funds available in any Lockbox Account. In the event that any payments in
respect of any Receivable are made directly to a Servicer (including any
employees thereof or independent contractors employed thereby), such Servicer
shall, within two Business Days of receipt thereof, deliver (which may be via
regular mail) or deposit such amounts to a Lockbox, a Lockbox Account or the
Collection Account and, prior to forwarding such amounts, such Servicer shall
hold such payments in trust as custodian for the Company and the Trustee.
(b) Each Lockbox Agreement shall provide that the Lockbox Processor
thereunder is irrevocably directed, and such Lockbox Processor irrevocably
agrees, (i) to deposit funds received in the Lockbox directly into the Lockbox
Account and (ii) to transfer all available funds on deposit in the Lockbox
Account within one Business Day of the Business Day Received to the Trustee for
deposit in the Collection Account. Each Lockbox Agreement shall be
substantially in the form specified in the Pooling Agreement, subject to
modifications thereof as provided in the Pooling Agreement and applicable
Supplements. Prior to any resignation of the Lockbox Processor or termination
of the Lockbox Processor by the Company or the Trustee with respect to any
Receivables, each Servicer hereby agrees (to the extent that it is a Responsible
Servicer with respect to such Receivables) to obtain a replacement Lockbox
Processor. Upon satisfaction of the Rating Agency Condition and the consent of
the Trustee (which shall not be unreasonably withheld), a Servicer may enter
into any amendments or modifications of a Lockbox Agreement that the Servicer
reasonably deems necessary to conform such Lockbox Agreement to the cash
management system of the Company or the Responsible Servicer(s).
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(c) The Trustee shall administer amounts on deposit in the Collection
Account in accordance with the terms of the Pooling and Servicing Agreements.
Each of the Company, the Master Servicer and each Servicer acknowledges and
agrees that (i) it shall not have any right to withdraw any funds on deposit in
the Collection Account or any Lockbox Account and (ii) all amounts deposited in
the Collection Account or any Lockbox Account shall be under the sole dominion
and control of the Trustee (subject to the Master Servicer's or Servicers'
rights to direct the application of any such amounts as provided by the terms of
any Pooling and Servicing Agreement).
(d) As soon as practicable, but in any event not later than the
Business Day following the date that a Servicer identifies any of the collected
funds received in the Collection Account as funds that do not constitute
Collections on account of the Receivables, such moneys that do not constitute
such Collections shall be remitted to the Master Servicer and then by the Master
Servicer to the appropriate Seller.
(e) Unless otherwise required by law or unless an Obligor designates
that a payment be applied to a specific Receivable, all Collections received
from an Obligor shall be applied to the oldest Receivables of such Obligor.
SECTION 2.04. Reconciliation of Deposits. If in respect of
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Collections on account of a Receivable the Responsible Servicer deposits into
the Collection Account (a) a check that is not honored for any reason or (b) an
amount that is less than or more than the actual amount of such Collections,
such Servicer shall, in lieu of making a reconciling withdrawal or deposit, as
the case may be, adjust the amount subsequently deposited into such Collection
Account to reflect such dishonored check or mistake. Any Receivable in respect
of which a dishonored check is received shall be deemed not to have been paid;
provided, that no adjustments made pursuant to this
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10
Section 2.04 shall change any amount previously reported pursuant to Section
4.02.
SECTION 2.05. Servicing Compensation. (a) As full compensation for
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the Servicers' servicing activities hereunder and reimbursement for their
expenses as set forth in subsection 2.05(b), the Master Servicer, on behalf of
the Servicers, shall be entitled to receive on each Distribution Date, for the
preceding Settlement Period prior to the termination of the Trust pursuant to
Section 9.01 of the Pooling Agreement, a servicing fee (the "Servicing Fee").
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The Servicing Fee shall be an amount equal to (i) the product of (A) the
Servicing Fee Percentage and (B) the average aggregate Principal Amount of the
Receivables in the Trust for such Settlement Period and (C) the number of days
in such Settlement Period, divided by (ii) 360. Except as otherwise set forth
in the related Supplement, the share of the Servicing Fee allocable to each
Outstanding Series for any Settlement Period shall be an amount equal to the
product of (i) the Servicing Fee for such Settlement Period and (ii) a fraction
(expressed as a percentage) (A) the numerator of which is the daily average
Invested Amount for such Settlement Period with respect to such Outstanding
Series and (B) the denominator of which is the daily average Aggregate Invested
Amount for such Settlement Period (with respect to any such Series, the "Monthly
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Servicing Fee"); provided, however, that if on any day a Seller or any Affiliate
- ------------- -------- -------
thereof is acting as a Servicer and an Early Amortization Event has occurred and
is continuing with respect to any Outstanding Series, (i) until the amount on
deposit in the Expense Account equals the Expense Account Limit, the portion of
the Monthly Servicing Fee payable to such Seller or Affiliate thereof with
respect to such Outstanding Series shall be deposited into the Expense Account
in accordance with Section 7.03 of the Pooling Agreement and (ii) thereafter,
the portion of the Monthly Servicing Fee payable to a Seller or an Affiliate
thereof with respect to such Outstanding Series shall be deferred until all
amounts due under the Investor Certificates of such Outstanding Series have been
paid in full. The
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Servicing Fee shall be payable to the Master Servicer, on behalf of the
Servicers, solely pursuant to the terms of, and to the extent amounts are
available for payment under, Article III of the Pooling Agreement.
(b) The Company hereby directs the Master Servicer and each Servicer
to pay amounts due to the Trustee pursuant to Section 8.05 of the Pooling
Agreement and the reasonable fees and disbursements of independent accountants,
and all other reasonable fees and expenses of the Trust (including counsel fees,
if any) not expressly stated herein to be for the account of the Certificate-
holders; provided however, that in no event shall the Master Servicer, any
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Servicer or the Trustee be liable for any Federal, state or local income or
franchise tax, or any interest or penalties with respect thereto, assessed on
the Trust or the Certificateholders except in accordance with Section 5.02 and
as otherwise expressly provided herein. Notwithstanding anything to the
contrary herein or in any other Pooling and Servicing Agreement, in the event
that the Master Servicer or any Servicer fails to pay any amount due to the
Trustee pursuant to Section 8.05 of the Pooling Agreement, or following the
commencement and continuation of an Early Amortization Period, the Trustee shall
be entitled, in addition to any other rights it may have under law and under the
Pooling Agreement, to receive directly such amounts owing to it under the
Pooling and Servicing Agreements from, and in the same order of priority as, the
Servicing Fee before payment to the Master Servicer, for the benefit of the
Servicers, of any portion thereof; provided, that in the event any Servicer
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shall have elected to waive its rights to payment of its portion of the
Servicing Fee or the Servicing Fee is deferred pursuant to subsection 2.05(a),
the Trustee shall nonetheless be entitled to receive such amounts from payments
that would ordinarily be applied to the payment of the Servicing Fee, in the
same order of priority as though such portion of the Servicing Fee were payable.
Each Servicer shall be required to pay expenses for its own account, and shall
not be entitled to any payment therefor other than its portion of the Servicing
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Fee. Nothing contained herein shall be construed to limit the obligation of the
Master Servicer, each Servicer or the Company to pay any amounts due the Trustee
pursuant to Section 8.05 of the Pooling Agreement.
ARTICLE III
Representations and Warranties of the
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Master Servicer and the Servicers
---------------------------------
As of (a) the Initial Closing Date and (b) each Issuance Date, each of
the Master Servicer and each Servicer hereby makes the following representations
and warranties to each of the other parties hereto:
SECTION 3.01. Organization; Powers. It (i) is a corporation duly
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organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (ii) has all requisite power and authority to
own its property and assets and to carry on its business as now conducted and as
proposed to be conducted, (iii) is qualified to do business in, and is in good
standing in, every jurisdiction where the nature of its business so requires,
except where the failure so to qualify could not reasonably be expected to
result in a Servicer Material Adverse Effect and (iv) has the corporate power
and authority to execute, deliver and perform its obligations under each of the
Transaction Documents and each other agreement or instrument contemplated hereby
to which it is or will be a party.
SECTION 3.02. Authorization; No Conflict. The execution, delivery
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and performance by it of each of the Transaction Documents that it is a party to
and the other transactions contemplated hereby and thereby (collectively, the
"Transactions") (i) have been duly authorized by all requisite corporate and, if
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required, stockholder action and (ii) will not (A) violate (1) any Requirement
of Law or (2) any provision of any Contractual Obligation to which it or any
Subsidiary is a party or by which any of them or any
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of their property is or may be bound, (B) be in conflict with, result in a
breach of or constitute (alone or with notice or lapse of time or both) a
default under, or give rise to any right to accelerate or to require the
prepayment, repurchase or redemption of any obligation under any such
Contractual Obligation, except where any such conflict, violation, breach or
default referred to in clause (A) or (B), individually or in the aggregate,
could not reasonably be expected to have a Servicer Material Adverse Effect, or
(C) result in the creation or imposition of any Lien upon or with respect to any
property or assets now owned or hereafter acquired by it or any Subsidiary
(other than any Lien created hereunder or contemplated or permitted hereby).
SECTION 3.03. Enforceability. This Agreement has been duly executed
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and delivered by it and constitutes, and each other Transaction Document to
which it is a party when executed and delivered by it will constitute, its
legal, valid and binding obligation enforceable against it in accordance with
such document's terms, subject (a) as to enforcement of remedies, to applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the enforcement of creditors' rights generally, from time to time in
effect and (b) to general principals of equity (whether enforcement is sought by
a proceeding in equity or at law).
SECTION 3.04. Governmental Approvals. No action, consent or approval
-----------------------
of, registration or filing with or any other action by any Governmental
Authority is or will be required in connection with the Transactions, except for
(i) the filing of Uniform Commercial Code financing statements and (ii) such as
have been made or obtained and are in full force and effect; provided, however,
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that with respect to Receivables owing by Government Obligors, any failure by it
to comply with the United States Federal Nonassignment Act (Public Contracts),
41 U.S.C. Sec. 15, or Assignment of Claims Act, 31 U.S.C. Sec. 3727, or with any
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similar legislation of any State shall not constitute a breach of this Section
3.04.
SECTION 3.05. Litigation; Compliance with Laws. (i) There are no
---------------------------------
actions, suits or proceedings at law or in equity or by or before any
Governmental Authority now pending or, to its knowledge, threatened against or
affecting it or any Subsidiary or any business, property or rights of any such
Person (A) that involve any Transaction Document or the Transactions or (B) as
to which there is a reasonable possibility of an adverse determination and that,
if adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Servicer Material Adverse Effect.
(ii) Neither it nor any Subsidiary is in default with respect to any
judgment, writ, injunction, decree or order of any Governmental Authority, where
such violation or default could reasonably be expected to result in a Servicer
Material Adverse Effect.
SECTION 3.06. Agreements. (i) Neither it nor any Subsidiary is a
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party to any agreement or instrument or subject to any corporate restriction
that has resulted or could reasonably be expected to result in a Servicer
Material Adverse Effect.
(ii) Neither it nor any Subsidiary is in default in any manner under
any provision of any Contractual Obligation to which it is a party or by which
it or any of its properties or assets are bound, where such default could
reasonably be expected to result in a Servicer Material Adverse Effect.
SECTION 3.07. No Servicer Default. No Servicer Default or Potential
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Servicer Default has occurred and is continuing.
SECTION 3.08. Servicing Ability. As of the related Issuance Date,
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there has not been since the date of
15
this Agreement any adverse change in its ability to perform its obligations as
Master Servicer or Servicer, as applicable, under any Transaction Document to
which it is a party.
SECTION 3.09. Location of Records. The office at which it keeps its
--------------------
records concerning any Receivables either (i) is located at the address set
forth for it on Schedule 1 to the Receivables Sale Agreement or (ii) has been
notified to the Company and the Trustee in accordance with the provisions of
Section 4.08. Its chief executive office is located at such location and such
office is the place where it is "located" for the purposes of Section
9-103(3)(d) of the UCC as in effect in the State of New York.
SECTION 3.10. Insurance. Each Servicer has fidelity bond or other
----------
coverage in full force and effect insuring against losses through wrongdoing of
its officers and employees who are involved in the servicing of Receivables,
including coverage of depositor's forgery, in an amount at least equal to and
with breadth of coverage at least as comprehensive as the coverage indicated on
Exhibit C and with the insurers indicated on Exhibit C.
ARTICLE IV
Covenants of the Master Servicer and the Servicers
--------------------------------------------------
SECTION 4.01. Delivery of Daily Reports. Unless otherwise specified
--------------------------
in the Supplement with respect to any Series, for each Business Day (the
"Reported Day") and with respect to each Outstanding Series, the Master Servicer
------------
shall submit to the Company, the Trustee and the relevant Agent no later than
1:30 p.m., New York City time, on the next Business Day following each Reported
Day, a written report substantially in the form attached to the related
Supplement for each such Series (the "Daily Report") setting forth for the
------------
Reported Day total Collections on the Receivables, the amount of Collections
attributable to
16
previously identified Ineligible Receivables for which an Adjustment Payment and
a Seller Adjustment Payment have been made pursuant to the Pooling Agreement and
the Receivables Sale Agreement, respectively (which are payable to the
appropriate Seller in accordance with subsection 2.06(a) of the Receivables Sale
Agreement), the amount of Receivables originated, the amount of Ineligible
Receivables (if any) identified on the Reported Day, and such other information
as the Company, the Trustee or such Agent may reasonably request. The Daily
Report may be delivered in an electronic format mutually agreed upon by the
Master Servicer and the Trustee, or pending such agreement, by facsimile. By
delivery of a Daily Report, the Master Servicer shall be deemed to have made a
representation and warranty that all information set forth therein is true and
correct in all material respects.
SECTION 4.02. Delivery of Monthly Settlement Statement. Unless
-----------------------------------------
otherwise specified in the Supplement with respect to any Outstanding Series,
the Master Servicer hereby covenants and agrees that it shall deliver to the
Company, the Trustee, the relevant Agent and each Rating Agency by 11:00 a.m.,
New York City time, on each Settlement Report Date, a certificate of a
Responsible Officer of the Master Servicer substantially in the form attached to
the related Supplement for each such Outstanding Series (a "Monthly Settlement
------------------
Statement") setting forth, as of the last day of the Settlement Period most
- ---------
recently ended and for such Settlement Period, (a) the information described in
the form of such Monthly Settlement Statement with such changes as may be agreed
to by the Master Servicer, the Company, the Trustee and the relevant Agent (if
any) and subject to satisfaction of the Rating Agency Condition and (b) such
other information as the Trustee or the relevant Agent may reasonably request.
Such certificate shall include a certification by a Responsible Officer of the
Master Servicer that, to such Responsible Officer's knowledge, the information
contained therein is true and correct in all material respects and each of the
Master Servicer and each Servicer has performed all of its
17
respective obligations in all material respects under each Transaction Document
to which it is a party throughout such preceding Settlement Period (or, if there
has been a default in the performance of any such obligation, specifying each
such default known to such Responsible Officer and the nature and status
thereof). A copy of each Monthly Settlement Statement may be obtained by any
Certificateholder by a request in writing to the Trustee addressed to the
Corporate Trust office.
SECTION 4.03. Delivery of Annual Master Servicer's and Servicers'
---------------------------------------------------
Certificates. Each of the Master Servicer and each Servicer shall deliver to
- -------------
the Company, the Trustee, each Agent and each Rating Agency, a certificate of a
Responsible Officer of the Master Servicer or such Servicer, as applicable,
substantially in the form of Exhibit A hereto, certifying that:
(a) a review of its activities during the preceding calendar year (or
in the case of the first such certificate issued after the Initial Closing
Date, during the period from the Initial Closing Date) and of its performance
under each Transaction Document was made under the supervision of such
Responsible Officer;
(b) to such Responsible Officer's knowledge, based on such review, it
has performed its obligations in all material respects under each Transaction
Document throughout the period covered by such certificate (or, if there has
been a material default in the performance of any such obligation, specifying
each such default known to such Responsible Officer and the nature and status
thereof); and
(c) in the case of the certificate of a Responsible Officer of the
Master Servicer, each Daily Report and Monthly Settlement Statement was
accurate and correct in all material respects.
18
Such certificate shall be delivered by the Master Servicer and each Servicer
within 90 days after the end of each calendar year commencing with the year
ending December 31, 1996. A copy of each such certificate may be obtained by
any Certificateholder by a request in writing to the Trustee addressed to the
Corporate Trust Office.
SECTION 4.04. Delivery of Independent Public Accountants' Servicing
-----------------------------------------------------
Reports. Each of the Master Servicer and each Servicer shall cause Independent
- --------
Public Accountants to furnish to the Company, the Trustee, each Agent and each
Rating Agency within 120 days following the last day of each of its fiscal years
a letter to the effect that such firm has performed certain agreed-upon
procedures (as set forth in Exhibit B hereto) relating to it and its performance
hereunder during the preceding fiscal year and describing such accountants'
findings with respect to such procedures. A copy of such report may be obtained
by any Certificateholder by a request in writing to the Trustee addressed to the
Corporate Trust Office.
SECTION 4.05. Extension, Amendment and Adjustment of Receivables;
---------------------------------------------------
Amendment of Policies. (a) Each Servicer hereby covenants and agrees with the
- ----------------------
Company and the Trustee that it shall not extend, rescind, cancel, amend or
otherwise modify, or attempt or purport to extend, rescind, cancel, amend or
otherwise modify, the terms of, or grant any Dilution Adjustment to, any
Serviced Receivable, or otherwise take any action that is intended to cause or
permit a Serviced Receivable that is an Eligible Receivable to cease to be an
Eligible Receivable, except in any such case (i) in accordance with the terms of
its Policies, (ii) as required by any Requirement of Law or (iii) in the case of
any Dilution Adjustments, upon the payment by or on behalf of the appropriate
Seller of a Seller Adjustment Payment pursuant to Section 2.05 of the
Receivables Sale Agreement. Any Dilution Adjustment authorized to be made
pursuant to the preceding sentence shall result in the reduction, on the
Business Day on which such Dilution Adjustment arises or is identified, in the
aggregate
19
Principal Amount of Receivables and if as a result of such a reduction the
Aggregate Target Receivables Amount exceeds the Aggregate Receivables Amount,
the Company (in addition to the obligations of the Sellers under the Receivables
Sale Agreement in respect of such Dilution Adjustment) shall be required to pay
into the Series Principal Collection Sub-subaccount with respect to each
Outstanding Series in immediately available funds, within one Business Day of
such determination, the pro rata share for such Series of the amount (the "Cash
----
Dilution Payment") by which the Aggregate Target Receivables Amount exceeds the
- ----------------
Aggregate Receivables Amount.
(b) No Servicer shall change or modify its Policies in any material
respect, except (i) if such change or modification is necessary under any
Requirement of Law or (ii) if the Rating Agency Condition is satisfied with
respect thereto. Each Servicer shall provide notice to the Company, the
Trustee, each Agent and each Rating Agency of any change or modification of its
Policies; provided, however, that if any change or modification, other than a
-------- --------
change or modification permitted pursuant to clause (i) above, would be
reasonably likely to have a Material Adverse Effect on the interests of the
Investor Certificateholders of a Series that is not rated by a Rating Agency,
the consent of the applicable Agent (or if none, as specified in the related
Supplement) shall be required to effect such change or modification.
SECTION 4.06. Protection of Certificateholders' Rights. Each
-----------------------------------------
Servicer hereby agrees with the Company and the Trustee that it shall take no
action, nor intentionally omit to take any action, that could reasonably be
expected to adversely impair the rights, remedies or interests of the
Certificateholders under the Transaction Documents in respect of the Serviced
Receivables or any Related Property nor shall it reschedule, revise or defer
payments due on any Serviced Receivable except in accordance with its Policies
or Section 4.05 above.
20
SECTION 4.07. Security Interest. Each Servicer hereby covenants and
------------------
agrees that it shall not sell, pledge, assign or transfer to any other Person,
or grant, create, incur, assume or suffer to exist any Lien on, any Serviced
Receivable, whether now existing or hereafter created, or any interest therein,
and each Servicer shall defend the right, title and interest of the Company and
the Trust in, to and under any Serviced Receivable, whether now existing or
hereafter created, against all claims of third parties claiming through or under
such Servicer or the Company; provided, however, that nothing in this
-------- -------
Section 4.07 shall prevent or be deemed to prohibit a Servicer from suffering to
exist upon any of the Serviced Receivables any Permitted Liens described in
clause (i) or (ii) of the definition thereof.
SECTION 4.08. Location of Records. Each of the Master Servicer and
--------------------
each Servicer hereby covenants and agrees that it (a) shall not move its chief
executive office or any of the offices where it keeps its records with respect
to any Receivables outside of the location specified in respect thereof on
Schedule 1 to the Receivables Sale Agreement, in any such case, without giving
30 days prior written notice to the Company, the Trustee, each Agent and the
Rating Agencies and (b) shall promptly take all actions (including any filings
under the UCC) required or reasonably necessary in order to continue the valid
and enforceable interest of the Trust in all Receivables now owned by the Trust
or hereafter created.
SECTION 4.09. Visitation Rights. (a) Each of the Master Servicer
------------------
and each Servicer shall, at any reasonable time during normal business hours on
any Business Day and from time to time, upon reasonable prior notice, and as
often as may reasonably be requested, subject to its security and
confidentiality requirements, (i) permit the Company, the Trustee, any Agent or
any of their respective agents or representatives, (A) to examine and make
copies of and abstracts from its records, books of account and documents
(including computer tapes and disks) relating to
21
the Receivables or the Serviced Receivables, as the case may be, and
(B) following the termination of its appointment as Master Servicer or Servicer,
as the case may be, to be present at its offices and properties to administer
and control the Collection of the Receivables or the Serviced Receivables, as
the case may be, and to allow the Trustee access to documents, instruments and
other records (including the documents, instruments and other records required
to be transferred to a successor pursuant to Section 6.01 upon a Master Service
Transfer or Service Transfer, as the case may be), equipment and personnel that
are necessary to enable a Successor Master Servicer to continue master servicing
operations or a Successor Servicer to continue servicing operations, as the case
may be, in accordance with the terms of the Transaction Documents and
(ii) permit the Company, the Trustee, any Agent or any of their respective
agents or representatives to visit its properties to discuss its affairs,
finances and accounts relating to the Receivables or the Serviced Receivables,
as the case may be, or its performance hereunder or under any of the other
Transaction Documents to which it is a party with any of its officers or
directors and with its Independent Public Accountants; provided, that the
--------
Company, the Trustee or the Agent, as the case may be, shall notify it prior to
any contact with such accountants and shall give it the opportunity to
participate in such discussions.
(b) Each of the Master Servicer and each Servicer shall provide the
Trustee with such other information as the Trustee may reasonably request in
connection with the fulfillment of the Trustee's obligations under any Pooling
and Servicing Agreement.
SECTION 4.10. Lockbox Agreement; Lockbox Accounts. The Master
------------------------------------
Servicer and each Servicer shall (a) maintain, and keep in full force and
effect, each Lockbox Agreement to which it is a party, except to the extent
otherwise permitted under the terms of the Transaction Documents, and (b) take
all reasonable actions necessary to ensure that each related Lockbox Account
shall
22
be free and clear of, and defend each such Lockbox Account against, any writ,
order, stay, judgment, warrant of attachment or execution or similar process;
provided, however, that upon satisfaction of the Rating Agency Condition and the
- -------- -------
consent of the Trustee (which shall not be unreasonably withheld), the Company
may enter into any amendments to or modifications of a Lockbox Agreement that
the Company reasonably deems necessary to conform such Lockbox Agreement to the
cash management system of the Company or the Responsible Servicer(s).
SECTION 4.11. Delivery of Financial Statements. The Master Servicer
---------------------------------
shall furnish to the Company, the Trustee, each Agent and the Rating Agencies:
(a) within 90 days after the end of each fiscal year, Furnishings
International Inc.'s consolidated balance sheet and related statements of
income, stockholders' equity and cash flows showing the consolidated
financial condition of Furnishings International Inc. and its consolidated
subsidiaries as of the close of such fiscal year and the consolidated results
of its operations and the operations of such subsidiaries during such year
(and showing, on a comparative basis, the figures for the previous year), all
audited by Ernst & Young LLP, Coopers and Lybrand LLP or other independent
public accountants of recognized national standing acceptable to the Required
Lenders (as defined in the Credit Agreement) and accompanied by an opinion of
such accountants (which shall not be qualified in any material respect) to
the effect that such consolidated financial statements fairly present in all
material respects the financial condition and results of operations of
Furnishings International Inc. and its consolidated subsidiaries on a
consolidated basis in accordance with GAAP consistently applied;
(b) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year,
23
Furnishings International Inc.'s unaudited consolidated balance sheet and
related statements of income, stockholders' equity and cash flows showing the
consolidated financial condition of Furnishings International Inc. and its
consolidated subsidiaries as of the close of such fiscal quarter and the
consolidated results of its operations and the operations of such
subsidiaries during such fiscal quarter and the then elapsed portion of the
fiscal year (and showing, on a comparative basis, such information as of and
for the corresponding dates and periods of the preceding fiscal year), all
certified by a Financial Officer (as defined in the Credit Agreement) of
Furnishings International Inc. as fairly presenting in all material respects
the consolidated financial condition and results of operations of Furnishings
International Inc. and its consolidated subsidiaries on a consolidated basis
in accordance with GAAP (except for the absence of footnote disclosure)
consistently applied, subject to year-end audit adjustments;
(c) within 30 days after the end of each month (other than the last
month of any fiscal quarter), Furnishings International Inc.'s unaudited
consolidated balance sheet and related statements of income, stockholders'
equity and cash flows, showing the consolidated financial condition of
Furnishings International Inc. and its consolidated subsidiaries as of the
close of such month and the consolidated results of its operations and the
operations of such subsidiaries during such month and the then-elapsed
portion of the fiscal year;
(d) concurrently with any delivery of financial statements under sub-
paragraph (a) or (b) above, a certificate of the Financial Officer certifying
such statements;
24
(e) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by
Furnishings International Inc., any Servicer or any Subsidiary with the
Securities and Exchange Commission, or any Governmental Authority succeeding
to any or all of the functions of said Commission, or with any national
securities exchange, or distributed to its shareholders generally, as the
case may be; and
(f) promptly, from time to time, such other information regarding the
operations, business affairs and financial condition of Furnishings
International Inc., any Servicer or any Subsidiary, or compliance with the
terms of any Transaction Document, in each case as the Agent or any Purchaser
may reasonably request.
SECTION 4.12. Notices. Each of the Master Servicer and each Servicer
--------
shall furnish to the Company, the Trustee, each Agent and each Rating Agency,
promptly upon obtaining knowledge of the occurrence of any Purchase Termination
Event, Potential Purchase Termination Event, Early Amortization Event, Potential
Early Amortization Event or Servicer Default, written notice thereof.
SECTION 4.13. Insurance. Each Servicer hereby covenants and agrees
----------
that it shall maintain in full force and effect fidelity bond or other coverage
insuring against losses through wrongdoing of its officers and employees who are
involved in the servicing of Receivables, including coverage of depositor's
forgery, in an amount at least equal to and with breadth of coverage at least as
comprehensive as the coverage indicated on Exhibit C and with insurers having a
claims-paying ability substantially comparable to the insurers indicated on
Exhibit C.
25
ARTICLE V
Other Matters Relating to the
-----------------------------
Master Servicer and the Servicers
---------------------------------
SECTION 5.01. Merger, Consolidation, etc. Neither the Master
---------------------------
Servicer nor any Servicer shall enter into any merger, consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or make any material change in its present method
of conducting business, or convey, sell, transfer, lease, assign or otherwise
dispose of, all or substantially all of its property, business or assets other
than the assignments and transfers contemplated hereby; provided that the Master
--------
Servicer or any Servicer may merge into or consolidate with any other
corporation or convey, sell or transfer its property, business or assets
substantially as an entirety to another Person, if:
(a) the corporation into which it is merged or the corporation formed
by such consolidation or the Person that acquires by conveyance, sale or
transfer its property, business or assets 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, and, if it is not the
surviving entity, such corporation shall assume, without the execution or
filing of any paper or any further act on the part of any of the parties
hereto, the performance of every one of its covenants and obligations
hereunder; and
(b) it has delivered to the Trustee an officer's certificate executed
by a Vice President or other senior officer and an Opinion of Counsel
addressed to the Trust and the Trustee each stating that such consolidation,
merger, conveyance or transfer complies with this Section 5.01 and an
officer's certificate executed by a Vice President or other senior officer
stating that all conditions precedent herein provided
26
for relating to such transaction have been complied with.
SECTION 5.02. Indemnification of the Trust and the Trustee.
---------------------------------------------
(a) Each of the Master Servicer and the Servicer hereby agrees to indemnify and
hold harmless the Company, the Trustee for the benefit of the Certificateholders
and the Trustee and their respective directors, officers, agents and employees
(an "Indemnified Person") from and against any loss, liability, expense, damage
------------------
or injury suffered or sustained by reason of any acts, omissions or alleged acts
or omissions arising out of, or relating to, its activities pursuant to any
Pooling and Servicing Agreement to which it is a party, including but not
limited to any judgment, award, settlement, reasonable attorneys' fees and other
reasonable costs or expenses incurred in connection with the defense of any
actual or threatened action, proceeding or claim; provided that neither the
--------
Master Servicer nor any Servicer shall indemnify any Indemnified Person for any
liability, cost or expense of such Indemnified Person (i) arising solely from a
default by an Obligor with respect to any Receivable (except that
indemnification shall be made to the extent that such default arises out of its
failure to perform its duties or obligations under this Agreement), or (ii) to
the extent that such liability, cost or expense arises from the gross
negligence, bad faith or wilful misconduct of such Indemnified Person (or any of
its respective directors, officers, agents or employees). The provisions of
this indemnity shall run directly to, and be enforceable by, an injured party
and shall survive the termination of the Agreement or the resignation of the
Master Servicer or Servicer, as the case may be.
(b) In addition to and without giving effect to any limitations set
forth in subsection (a) above, each Servicer shall indemnify and hold harmless
each Indemnified Person from and against any loss, liability, expense, damage or
injury suffered or sustained by reason of a breach by such Servicer of any
covenant contained in subsections
27
2.02(g) or 2.02(h) or Sections 4.05, 4.06 or 4.07 that adversely affects the
interest of the Company or the Investor Certificateholders under the Transaction
Documents with respect to any Serviced Receivable (an "Indemnification Event"),
---------------------
in an amount equal to the outstanding Principal Amount at such time of such
Receivable. Payment shall occur on or prior to the 30th Business Day after the
day such Indemnification Event becomes known to such Servicer unless such
Indemnification Event shall have been cured on or before such day.
SECTION 5.03. Master Servicer and Servicers Not to Resign. Neither
--------------------------------------------
the Master Servicer nor any Servicer shall resign from the obligations and
duties hereby imposed on it except upon determination that (a) the performance
of its duties hereunder is no longer permissible under applicable law, and
(b) there is no reasonable course of action that it could take to make the
performance of its duties hereunder permissible under applicable law. Any such
determination permitting the resignation of the Master Servicer or any Servicer
shall be evidenced as to clause (a) above by an Opinion of Counsel to such
effect delivered to the Company, the Trustee and each Agent. No such
resignation shall become effective until a Successor Master Servicer or
Successor Servicer, as the case may be, or the Trustee shall have assumed the
responsibilities and obligations of the Master Servicer or such Servicer in
accordance with Section 6.02. The Trustee, the Company, each Agent and each
Rating Agency (and, in the case of the resignation of any Servicer, the Master
Servicer) shall be notified of such resignation by the resigning Person.
SECTION 5.04. Access to Certain Documentation and Information
-----------------------------------------------
Regarding the Receivables. Each Servicer shall hold in trust for the Company
- --------------------------
and the Trustee at the office of such Servicer such computer programs, books of
account and other records as are reasonably necessary to enable the Trustee to
determine at any time the status of the Serviced Receivables and all collections
and payments in respect thereof (including, without limitation, an ability to
28
recreate records evidencing the Serviced Receivables in the event of the
destruction of the originals thereof).
ARTICLE VI
Servicer Defaults;
------------------
Servicer Termination
--------------------
SECTION 6.01. Servicer Defaults. If any one of the following events
------------------
(a "Servicer Default") shall occur and be continuing with respect to the Master
----------------
Servicer or one or more Servicers, as the case may be:
(a) failure by the Master Servicer to deliver, within two Business
Days of the earlier date set forth below in clause (i) or (ii), any Daily
Report or, within three Business Days of the earlier date set forth below in
clause (i) or (ii), any Monthly Settlement Statement conforming in all
material respects to the requirement of Section 4.01 or 4.02, as the case may
be, in each case, after the earlier to occur of (i) the date upon which a
Responsible Officer of the Master Servicer obtains knowledge of such failure
or (ii) the date on which written notice of such failure, requiring the same
to be remedied, shall have been given to the Master Servicer by the Company
or the Trustee, or to the Company, the Master Servicer and the Trustee from
holders of Investor Certificates evidencing 25% or more of the Aggregate
Invested Amount or by any Agent;
(b) failure by the Master Servicer or any Servicer to pay any amount
required to be paid by it under any Pooling and Servicing Agreement on or
before the date occurring five Business Days after the earlier to occur of
(i) the date upon which a Responsible Officer of the Master Servicer or such
Servicer obtains knowledge of such failure or (ii) the date on which written
notice of such failure, requiring the same to be remedied,
29
shall have been given (A) (I) in the case of a failure on the part of the
Master Servicer, to the Master Servicer or (II) in the case of a failure on
the part of any Servicer, to the Master Servicer or such Servicer, by the
Company or the Trustee, or (B) to the Company, to the Trustee and (I) in the
case of a failure on the part of the Master Servicer, to the Master Servicer
or (II) in the case of a failure on the part of any Servicer, to the Master
Servicer or such Servicer by holders of Investor Certificates evidencing 25%
or more of the Aggregate Invested Amount or by any Agent;
(c) failure on the part of the Master Servicer or any Servicer duly to
observe or to perform any other of its covenants or agreements set forth in
any Pooling and Servicing Agreement that has an adverse effect on the holders
of any Outstanding Series and that continues unremedied until 30 days after
the date on which written notice of such failure, requiring the same to be
remedied, shall have been given (A) (I) in the case of a failure on the part
of the Master Servicer, to the Master Servicer or (II) in the case of a
failure on the part of any Servicer, to the Master Servicer or such Servicer,
by the Company or the Trustee, or (B) to the Company, to the Trustee and
(I) in the case of a failure on the part of the Master Servicer, to the
Master Servicer or (II) in the case of a failure on the part of any Servicer,
to the Master Servicer or such Servicer by holders of Investor Certificates
evidencing 25% or more of the Aggregate Invested Amount or by any Agent;
provided, that no Servicer Default shall be deemed to occur under this
--------
subsection with respect to a failure on the part of any Servicer if such
Servicer shall have complied with the provisions of Section 5.02(b) with
respect thereto;
(d) any representation, warranty or certification made by the Master
Servicer or any Servicer in any Pooling and Servicing Agreement or in any
certificate
30
delivered pursuant thereto shall prove to have been incorrect in any material
respect when made or deemed made, which incorrectness has an adverse effect
on the holders of any Outstanding Series and which adverse effect continues
unremedied until 30 days after the date on which written notice thereof,
requiring the same to be remedied, shall have been given (A) (I) in the case
of a failure on the part of the Master Servicer, to the Master Servicer or
(II) in the case of a failure on the part of any Servicer, to the Master
Servicer or such Servicer, by the Company or the Trustee, or (B) to the
Company, to the Trustee and (I) in the case of a failure on the part of the
Master Servicer, to the Master Servicer or (II) in the case of a failure on
the part of any Servicer, to the Master Servicer or such Servicer by holders
of Investor Certificates evidencing 25% or more of the Aggregate Invested
Amount or by any Agent; provided, that no Servicer Default shall be deemed to
--------
occur under this subsection with respect to a failure on the part of any
Servicer if such Servicer shall have complied with the provisions of
Section 5.02(b) with respect thereto;
(e)(i) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Master Servicer or any Servicer
in an involuntary case under any Applicable Insolvency Law, which decree or
order is not stayed, or any other similar relief shall be granted under any
applicable Federal or state law and shall not be stayed; (ii) an involuntary
case is commenced against the Master Servicer or any Servicer under any
Applicable Insolvency Law, a decree or order of a court having jurisdiction
in the premises for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over the Master
Servicer or any Servicer, or over all or a substantial part of the property
of the Master Servicer or any Servicer shall have been entered, an interim
receiver, trustee or other custodian of the Master Servicer or any Servicer
31
for all or a substantial part of the property of the Master Servicer or such
Servicer is involuntarily appointed or a warrant of attachment, execution or
similar process is issued against any substantial part of the property of the
Master Servicer or any Servicer, and the continuance of any such events in
this clause (ii) for 60 days unless dismissed, bonded or discharged; (iii)
the Master Servicer or any Servicer shall at its request have a decree or an
order for relief entered with respect to it, commence a voluntary case under
the Bankruptcy Code or any Applicable Insolvency Law, consent to the entry of
a decree or an order for relief in an involuntary case, or to the conversion
of an involuntary case to a voluntary case, under any such law, or consent to
the appointment of or taking possession by a receiver, trustee or other
custodian of all or a substantial part of its property; (iv) the making by
the Master Servicer or any Servicer of any general assignment for the benefit
of creditors; (v) the inability or failure of the Master Servicer or any
Servicer generally to pay its debts as such debts become due; or (vi) the
Board of Directors of the Master Servicer or any Servicer adopts any
resolution or otherwise authorizes action to approve any of the foregoing; or
(f) there shall have occurred and be continuing a Purchase Termination
Event under the Receivables Sale Agreement affecting any Serviced Receivables
of such Servicer;
then, in the event of any Servicer Default, so long as the Servicer Default
shall not have been remedied or waived, the Company (with the consent of the
Trustee) may, the Company at the direction of the Trustee shall, and the Company
and the Trustee shall, at the written direction of the holders of Investor
Certificates evidencing more than 50% of the Aggregate Invested Amount voting as
a single class, by notice then given in writing to the Master Servicer, to each
Rating Agency and, if the Servicer Default relates to a
32
default on the part of any Servicer, to such Servicer (a "Termination Notice"),
------------------
terminate all or any part of the rights and obligations of the Master Servicer
or such Servicer, as the case may be, under the Pooling and Servicing
Agreements. Notwithstanding anything to the contrary in this Section 6.01, a
delay in or failure of performance referred to under clause (b) above for a
period of 10 Business Days after the applicable grace period or a delay in or
failure of performance referred to under clauses (a), (c) or (d) above for a
period of 30 Business Days after the applicable grace period shall not
constitute a Servicer Default, if such delay or failure could not have been
prevented by the exercise of reasonable diligence by the Master Servicer or such
Servicer and such delay or failure was caused by a Force Majeure Delay. After
receipt by the Master Servicer or a Servicer of a Termination Notice, and on the
date that a Successor Master Servicer or Successor Servicer, as the case may be,
shall have been appointed by the Company and the Trustee pursuant to Section
6.02, all authority and power of the Master Servicer or such Servicer, as the
case may be, under any Pooling and Servicing Agreement to the extent specified
in such Termination Notice shall pass to and be vested in the Successor Master
Servicer (a "Master Service Transfer") or a Successor Servicer (a "Service
----------------------- -------
Transfer"), as the case may be; and, without limitation, the Trustee is hereby
- --------
directed, authorized and empowered (upon the failure of the Master Servicer or
such Servicer to cooperate) to execute and deliver, on behalf of the Master
Servicer or such Servicer, as attorney-in-fact or otherwise, all documents and
other instruments upon the failure of the Master Servicer or such Servicer to
execute or to deliver such documents or instruments, and to do and to accomplish
all other acts or things necessary or appropriate to effect the purposes of such
Master Service Transfer or Service Transfer and the Trustee shall incur no
liability in connection with effecting such Master Service Transfer or Service
Transfer. Each of the Master Servicer and each Servicer agrees to cooperate
with the Company and the Trustee and such Successor Master Servicer or Successor
Servicer, as the case may be, in effecting the termination
33
of the responsibilities and rights of the Master Servicer or such Servicer to
conduct its duties hereunder, including, without limitation, the transfer to
Successor Master Servicer or Successor Servicer, as the case may be, of all
authority of the Master Servicer to coordinate the servicing of all Receivables
or all authority of such Servicer to service the Serviced Receivables, as the
case may be, provided for under the Pooling and Servicing Agreements (including
in the case of such Servicer, without limitation, all authority over all
Collections that shall on the date of transfer be held by such Servicer for
deposit, or that have been deposited by such Servicer, in the Collection
Account, or that shall thereafter be received with respect to the Serviced
Receivables), and in assisting the Successor Master Servicer or Successor
Servicer, as the case may be. Upon a Master Service Transfer, the terminated
Master Servicer shall promptly (x) assemble all of its documents, instruments
and other records (including credit files, licenses (to the extent
transferable), rights, copies of all relevant computer programs and any
necessary licenses (to the extent transferable) for the use thereof, related
material, computer tapes, disks, cassettes and data) that (i) evidence or record
Receivables sold and assigned to the Trust and (ii) are otherwise necessary to
enable a Successor Master Servicer to coordinate servicing of all such
Receivables and to prepare and deliver Daily Reports and Monthly Settlement
Statements, with or without the participation of the terminated Master Servicer
and (y) deliver or license (to the extent transferable) the use of all of the
foregoing documents, instruments and other records to such Successor Master
Servicer at a place designated by such Successor Master Servicer. Upon any
Service Transfer, the terminated Servicer shall promptly (x) assemble all of its
documents, instruments and other records (including credit files, licenses (to
the extent transferable), rights, copies of all relevant computer programs and
any necessary licenses (to the extent transferable) for the use thereof, related
material, computer tapes, disks, cassettes and data) that (i) evidence or will
evidence or record Receivables sold and assigned to
34
the Trust and (ii) are otherwise necessary to enable a Successor Servicer to
effect the immediate Collection of such Receivables, with or without the
participation of the applicable Seller or such Servicer and (y) deliver or
license (to the extent transferable) the use of all of the foregoing documents,
instruments and other records to such Successor Servicer at a place designated
by such Successor Servicer. In recognition of any terminated Servicer's need to
have access to any such documents, instruments and other records that may be
transferred to a Successor Servicer hereunder, whether as a result of its
continuing responsibility as a servicer of accounts receivable that are not sold
and assigned to the Trust or otherwise, such Successor Servicer shall provide to
such terminated Servicer reasonable access to such documents, instruments and
other records transferred by such terminated Servicer to it in connection with
any activity arising in the ordinary course of such terminated Servicer's
business; provided that such terminated Servicer shall not disrupt or otherwise
--------
interfere with the Successor Servicer's use of and access to such documents,
instruments and other records. To the extent that compliance with this Section
6.01 shall require the terminated Master Servicer or any terminated Servicer to
disclose to the Successor Master Servicer or Successor Servicer information of
any kind that the terminated Master Servicer or such terminated Servicer
reasonably deems to be confidential, the Successor Master Servicer or Successor
Servicer, as the case may be, shall be required to enter into such customary
licensing and confidentiality agreements as the terminated Master Servicer or
such terminated Servicer shall reasonably deem necessary to protect its
interests. All costs and expenses incurred by the terminated Master Servicer or
any terminated Servicer, the Successor Master Servicer or any Successor Servicer
and the Trustee in connection with any Master Service Transfer or Service
Transfer shall be for the account of the terminated Master Servicer or
terminated Servicer, as the case may be, and to the extent any costs or expenses
incurred by the Trustee are not so paid, the Trustee shall be entitled to be
paid such items from amounts that would otherwise be
35
distributable to the Company under Article III of the Pooling Agreement.
SECTION 6.02. Trustee To Act; Appointment of Successor. (a) On and
-----------------------------------------
after (i) the receipt by a Servicer of a Termination Notice pursuant to Section
6.01 or (ii) the date on which a Servicer notifies the Trustee, the Master
Servicer, the Company and each Rating Agency in writing of its resignation
pursuant to Section 5.03 (the "Resignation Notice"), such Servicer shall
------------------
continue to perform all servicing functions under the Pooling and Servicing
Agreements until the earlier of (i) the date on which a Successor Servicer
accepts its appointment and (ii) 60 days after the delivery of such Termination
Notice or Resignation Notice, as the case may be. Upon the receipt by the
Master Servicer of a Termination Notice or Resignation Notice with respect to
any Servicer, the Master Servicer shall, without any action on the part of the
Company, the Trustee or any other Person, be deemed appointed as successor
servicer (a "Successor Servicer") with respect to the Serviced Receivables. The
------------------
Master Servicer shall accept its appointment as Successor Servicer by a written
assumption in a form acceptable to the Trustee and the Company, unless the
Master Servicer is unable to act as Servicer for the Serviced Receivables for
the reasons set forth in Section 5.03. If the Master Servicer is unable to act
as Servicer for the Serviced Receivables, the Master Servicer shall promptly
deliver a Resignation Notice and Opinion of Counsel to the Company and the
Trustee in the same manner as if the Master Servicer were resigning as Servicer
under Section 5.03, but such Resignation Notice from the Master Servicer shall
not have the effect of postponing the beginning of the 60-day period referred to
in the first sentence of this subsection 6.01(a). The Trustee and the Company,
or the Company (with the consent of the Trustee) shall, as promptly as
reasonably possible after the receipt of a Resignation Notice from the Master
Servicer in accordance with the preceding sentence, appoint an Eligible
Successor Servicer and such Successor Servicer shall accept its appointment by a
written assumption in a form acceptable to the Trustee and
36
the Company. Subject to any prior claim of the Trustee for reimbursement from
the Expense Account pursuant to Section 8.05, amounts in the Expense Account
shall be available for the Successor Servicer, including the Trustee, if acting
in such capacity (but only if such Successor Servicer is not Lifestyle Holdings
Ltd. or any Affiliate thereof), for payment of all costs, losses, liabilities,
expenses, damages or injuries (including, but not limited to, attorneys' fees
and other costs and expenses incurred in connection with any actual or
threatened action, proceeding or claim) in connection with the performance of
such Successor Servicer's duties under any Pooling and Servicing Agreement
except any such cost, loss, liability, expense, damage or injury as may arise
from its negligence or bad faith.
(b) On and after (i) the receipt by the Master Servicer of a
Termination Notice pursuant to Section 6.01 or (ii) the date on which the Master
Servicer delivers a Resignation Notice to the Trustee, the Company and each
Rating Agency notifying them of its resignation pursuant to Section 5.03, the
Master Servicer shall continue to perform all of its functions under the Pooling
and Servicing Agreements until the earlier of (i) the date on which a Successor
Master Servicer accepts its appointment and (ii) 60 days after the delivery of
such Termination Notice or Resignation Notice, as the case may be. The Trustee
and the Company, or the Company (with the consent of the Trustee) shall, as
promptly as reasonably possible after the receipt of a Resignation Notice from
the Master Servicer, appoint an Eligible Successor Servicer as Successor Master
Servicer and such Successor Master Servicer shall accept its appointment by a
written assumption in a form acceptable to the Trustee and the Company. All
amounts in the Expense Account shall be available for the Successor Master
Servicer, including the Trustee, if acting in such capacity (but only if such
Successor Master Servicer is not Lifestyle Holdings Ltd. or any Affiliate
thereof), for payment of all costs, losses, liabilities, expenses, damages or
injuries (including, but not limited to, attorneys' fees and other costs and
expenses incurred in connection with any actual or
37
threatened action, proceeding or claim) in connection with the performance of
the Successor Master Servicer's duties under any Pooling and Servicing Agreement
except any such cost, loss, liability, expense, damage or injury as may arise
from its negligence or bad faith.
(c) In the event that a Successor Master Servicer or Successor
Servicer has not been appointed or has not accepted its appointment at the time
when the Master Servicer or a Servicer ceases to act as Master Servicer or
Servicer, as the case may be, the Trustee without further action shall be
appointed Successor Master Servicer or Successor Servicer, as the case may be;
provided, that the Trustee shall only be responsible for the duties and
- --------
liabilities of Successor Master Servicer or such Successor Servicer that are
consistent with an orderly collection and liquidation of the Receivables and
other Trust Assets in the manner contemplated for such liquidations in Section
7.02 of the Pooling Agreement. The Trustee shall not be liable for any action
taken or not taken in effecting such liquidations of Receivables so long as such
liquidations are conducted in a commercially reasonable manner and on
commercially reasonable terms. The Trustee may delegate any of its master
servicing or servicing obligations to an affiliate or agent in accordance with
subsection 2.02(d). Notwithstanding the above, the Trustee shall, if the Trustee
is legally unable so to act, petition a court of competent jurisdiction to
appoint any Person qualifying as an Eligible Successor Servicer as the Successor
Master Servicer or a Successor Servicer hereunder. The Master Servicer shall
immediately give notice to each Rating Agency of the appointment of any
Successor Master Servicer or Successor Servicer.
(d) Upon its appointment, the Successor Master Servicer or Successor
Servicer shall be the successor in all respects to the Master Servicer or the
Servicer to which it is successor with respect to master servicing or servicing
functions, as the case may be, under the Pooling and Servicing Agreements (with
such changes as are agreed to between such Successor Master Servicer or
Successor
38
Servicer, as the case may be, and either the Company (with the consent of the
Rating Agencies) or the Company and the Trustee) and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Master
Servicer or such Servicer, as the case may be, by the terms and provisions
hereof, and all references in any Pooling and Servicing Agreement to the Master
Servicer or such Servicer, as the case may be, shall be deemed to refer to such
Successor Master Servicer or such Successor Servicer, as the case may be. The
Successor Master Servicer or such Successor Servicer shall not be liable for,
and the replaced Master Servicer or Servicer, as the case may be, shall
indemnify the Successor Master Servicer or such Successor Servicer, as the case
may be, against costs incurred by the Successor Master Servicer or Successor
Servicer as a result of, any acts or omissions of such replaced Master Servicer
or Servicer or any events or occurrences occurring prior to the Successor Master
Servicer's or Successor Servicer's acceptance of its appointment as Successor
Master Servicer or Successor Servicer. Any Successor Servicer shall manage the
servicing and administration of the Serviced Receivables in accordance with the
Policies of the replaced Servicer and the terms of the Pooling and Servicing
Agreements.
(e) If the Master Servicer becomes a Successor Servicer, the Master
Servicer shall receive the same servicing compensation in respect of the
Serviced Receivables as the replaced Servicer. If the Master Servicer is unable
to act as Successor Servicer, the Company and the Trustee shall review any bids
obtained from Eligible Successor Servicers and the Company and the Trustee, or
the Company (with the consent of the Trustee) may appoint any Eligible Successor
Servicer submitting such a bid as a Successor Servicer for servicing
compensation not in excess of the portion of the Servicing Fee previously
payable to the replaced Servicer.
SECTION 6.03. Waiver of Past Defaults. Holders of Investor
------------------------
Certificates evidencing more than 50% of the Aggregate Invested Amount may waive
any continuing default
39
by the Master Servicer, any Servicer or the Company in the performance of its
respective obligations hereunder and its consequences, except a default in the
failure to make any required deposits or payments in respect of any Series of
Certificates, which shall require a waiver by the holders of all of the affected
Investor Certificates. 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 the Pooling and Servicing Agreements. No
such waiver shall extend to any subsequent or other default or impair any right
consequent thereon except to the extent expressly so waived. Either the
Company, the Master Servicer or such Servicer shall provide notice to each
Rating Agency of any such waiver.
SECTION 6.04. Other Servicer Terminations. The Company shall
----------------------------
terminate all of the rights and obligations of any Servicer of Receivables
originated by any Seller that is terminated pursuant to Section 9.14 of the
Receivables Sale Agreement, but only with respect to Receivables originated by
such terminated Seller after such termination. Any such Servicer shall remain
bound hereunder (unless terminated hereunder otherwise than pursuant to this
Section 6.04) to perform all of its obligations as a Servicer with respect to
all Receivables originated by such Seller and sold to the Company (and sold by
the Company to the Trust) before such termination of such Seller under the
Receivables Sale Agreement.
ARTICLE VII
Miscellaneous Provisions
------------------------
SECTION 7.01. Amendment. This Agreement may only be amended,
----------
supplemented or otherwise modified from time to time if such amendment,
supplement or modification is effected in accordance with the provisions of
Section 10.01 of the Pooling Agreement.
40
SECTION 7.02. Termination. (a) The respective obligations and
------------
responsibilities of the parties hereto shall terminate on the Trust Termination
Date (unless such obligations or responsibilities are expressly stated to
survive the termination of this Agreement).
(b) All authority and power granted to the Master Servicer and any
Servicer under any Pooling and Servicing Agreement shall automatically cease and
terminate on the Trust Termination Date, and shall pass to and be vested in the
Company and, without limitation, the Company is hereby authorized and empowered
to execute and deliver, on behalf of the Master Servicer or any 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 such transfer of rights from and after the Trust Termination Date.
The Master Servicer and each Servicer shall cooperate with the Company in
effecting the termination of its responsibilities and rights to conduct master
servicing or servicing, as the case may be, of the Receivables. The Master
Servicer and each Servicer shall transfer all of its records relating to the
Receivables to the Company in such form as the Company may reasonably request
and shall transfer all other records, correspondence and documents to the
Company in the manner and at such times as the Company shall reasonably request.
To the extent that compliance with this subsection 7.02(b) shall require the
Master Servicer or any Servicer to disclose to the Company information of any
kind that the Master Servicer or such Servicer deems to be confidential, the
Company shall be required to enter into such customary licensing and
confidentiality agreements as the Master Servicer or such Servicer, as the case
may be, shall reasonably deem necessary to protect its interests.
SECTION 7.03. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY,
--------------
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO ANY CONFLICTS OF LAWS PRINCIPLES.
41
Section 7.04 Addition of Servicers. Subject to the terms and
----------------------
conditions hereof, from time to time one or more wholly owned, direct or
indirect Subsidiaries of Furnishings International Inc. that have been approved
as additional Sellers pursuant to the Pooling Agreement and any Supplement shall
become additional Servicers parties hereto upon (a) execution by each such
Subsidiary of an Additional Seller/Servicer Supplement and (b) satisfaction of
all conditions precedent set forth in Section 3.05 of the Receivables Sale
Agreement to such Subsidiary becoming an additional Seller.
SECTION 7.05. Notices. All notices, requests and demands to or upon
--------
the respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or three days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed as set forth in Section 10.05 of the Pooling Agreement or
Section 9.09 of the Receivables Sale Agreement, or to such other address as may
be hereafter notified by the respective parties hereto.
SECTION 7.06. 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. Delivery of an executed counterpart of a signature page to
this Agreement by facsimile transmission shall be effective as delivery of a
manually executed counterpart of this Agreement.
SECTION 7.07. Third-Party Beneficiaries. This Agreement shall inure
--------------------------
to the benefit of and be binding upon the parties hereto and the
Certificateholders and their respective successors and permitted assigns.
Except as provided in this Article VII, no other person shall have any right or
obligation hereunder.
42
SECTION 7.08. 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 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 7.09. Headings. The headings herein are for purposes of
---------
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
SECTION 7.10. No Set-Off. Except as expressly provided in this
-----------
Agreement, each of the Master Servicer and each Servicer agrees that it shall
have no right of set-off or banker's lien against, and no right to otherwise
deduct from, any funds held in the Collection Account for any amount owed to it
by the Company, the Trust, the Trustee or any Certificateholder.
SECTION 7.11. No Bankruptcy Petition. Each of the Master Servicer
-----------------------
and each Servicer hereby covenants and agrees that, prior to the date which is
one year and one day after the Trust Termination Date, it shall not institute
against, or join any other Person in instituting against, the Company any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any Federal or state bankruptcy or similar law.
43
IN WITNESS WHEREOF, the Company, the Master Servicer, each Servicer
and the Trustee have caused this Agreement to be duly executed by their
respective officers as of the day and year first above written.
LFI RECEIVABLES CORPORATION,
by
--------------------------
Name:
Title:
LFI SERVICING CORPORATION,
Master Servicer,
by
--------------------------
Name:
Title:
AMETEX FABRICS, INC.,
Servicer,
by
--------------------------
Name:
Title:
THE BERKLINE CORPORATION,
Servicer,
by
--------------------------
Name:
Title:
44
DREXEL HERITAGE
FURNISHINGS INC.,
Servicer,
by
--------------------------
Name:
Title:
FURNISHINGS
INTERNATIONAL INC.,
Servicer,
by
--------------------------
Name:
Title:
HENREDON FURNITURE
INDUSTRIES, INC.,
Servicer,
by
--------------------------
Name:
Title:
LA BARGE, INC.,
Servicer,
by
--------------------------
Name:
Title:
45
LEXINGTON FURNITURE
INDUSTRIES, INC.,
Servicer,
by
--------------------------
Name:
Title:
MAITLAND-SMITH, INC.,
Servicer,
by
--------------------------
Name:
Title:
ROBERT ALLEN FABRICS, INC.,
Servicer,
by
--------------------------
Name:
Title:
UNIVERSAL FURNITURE
INDUSTRIES, INC.,
Servicer,
by
--------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, not
in its individual capacity but
solely as Trustee,
by
--------------------------
Name:
Title:
EXHIBIT A TO
SERVICING AGREEMENT
-------------------
FORM OF ANNUAL [MASTER] SERVICER'S CERTIFICATE
(As required to be delivered within 90 days after the end
of each calendar year of the [Servicer/Master Servicer]
pursuant to Section 4.03 of the
Servicing Agreement referred to below)
[NAME OF SERVICER]
_________________________________________
LFI RECEIVABLES MASTER TRUST
-----------------------------------------
The undersigned, a duly authorized representative of [NAME OF
SERVICER/MASTER SERVICER] (the ["Servicer"/Master Servicer"]), as
-------- ---------------
[Servicer/Master Servicer] pursuant to (a) the Pooling Agreement, dated as of
August 5, 1996 (as amended, supplemented or otherwise modified from time to
time, the "Pooling Agreement"), by and among LFI Receivables Corporation (the
-----------------
"Company"), LFI Servicing Corporation, as Master Servicer and The Chase
-------
Manhattan Bank, as Trustee (the "Trustee") and (b) the Servicing Agreement,
dated as of August 5, 1996 (as amended, supplemented or otherwise modified from
time to time, the "Servicing Agreement"; the Pooling Agreement and the Servicing
-------------------
Agreement, collectively, the "Pooling and Servicing Agreements"), by and among
--------------------------------
the Company, the Servicers party thereto, the Master Servicer and the Trustee,
do hereby certify that:
1. [NAME OF SERVICER/MASTER SERVICER] is, as of the date hereof, the
[Servicer/Master Servicer] under the Pooling and Servicing Agreements.
2
2. The undersigned is duly authorized pursuant to the Pooling and
Servicing Agreements to execute and deliver this Certificate to the Trustee.
3. A review of the activities of the Company and the [Servicer/Master
Servicer] during the calendar year ended , and of its performance
--------- ---
under each Transaction Document was conducted under my supervision.
4. Based on such review, to my knowledge, each of the Company and the
[Servicer/Master Servicer] has performed in all material respects all its
obligations under each Transaction Document and no material default in the
performance of such obligations has occurred or is continuing except as set
forth in paragraph 5 below.
5. The following is a description of all material defaults in the
performance of the [Servicer/Master Servicer] or the Company under the
provisions of the Transaction Documents known to us to have been made during the
calendar year ended , , which sets forth in detail (i) the nature
--------- ---
of each such default, (ii) the action taken by the [Servicer/Master Servicer]
and /or the Company, if any, to remedy each such default and (iii) the current
status of each default:
[If applicable, insert "None."]
6. [if the Master Servicer is completing] The following is a
description of each material inaccuracy known to us to exist in any Daily Report
and/or Monthly Settlement Statement during the calendar year ended ,
--------
:
- ----
Capitalized terms used in this certificate have the meanings ascribed
to them in the Pooling and Servicing Agreements.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate
this day of , 199 .
--- --------- -
By:
------------------------
Name:
Title:
EXHIBIT B TO
SERVICING AGREEMENT
-------------------
FORM OF AGREED-UPON PROCEDURES
To the Board of Directors of LFI Receivables Corporation, the Trustee,
the Agent, the Rating Agencies and the Certificateholders:
At your request, we have performed the procedures enumerated below
with respect to the receivables of LFI Receivables Corporation, (the "Company")
that are serviced by [list] (the "Servicers") for the period from ,
199 to , 199 as set forth in the accompanying Monthly Settlement
Statements (the "Statements") and in the five accompanying Daily Reports (which
were selected on a random basis from the above-referenced period) (the "Daily
Reports"). Capitalized terms used herein and not defined herein shall have the
meanings assigned to such terms in the Pooling Agreement dated as of August 5,
1996, between the Company, LFI Servicing Corporation, as Master Servicer, and
The Chase Manhattan Bank, as Trustee, as amended, supplemented or otherwise
modified to the date hereof. These procedures, which were specified by you,
were performed solely to assist you, and this report is solely for your
information and should not be used by those who did not participate in
determining the procedures. The procedures and findings are as follows:
A. We obtained all Statements for the period from , 199 through
, 199 (the "Fiscal Period") and performed the following:
-- We recalculated the mathematical accuracy of the statements.
-- With respect to Receivables, we agreed the amounts appearing as
principal amounts, amounts outstanding with respect to each
Receivable and the amount of interest paid by Obligors with
respect to each Receivable as a result of late payment to either
schedules
2
prepared by the Servicers or to reports generated by the
Servicers' systems.
B. For a selection of three Statements (one of which was the Statement for the
last Settlement Period of the Fiscal Period), we performed the following
procedures:
With respect to the amount appearing as Collections on such Statements:
-- Obtained a daily listing of Collections for that Settlement
Period and agreed the total on the Statements to a cumulative
total of the daily listing of Collections for that period.
-- Agreed a random sample of 10% (but at least 10) of the daily
collections appearing on the daily listing of cash Collections to
the bank statements of LFI Master Trust (the "Trust").
-- Agreed the total amount of cash Collections allocated to the
Series Collection Subaccount of each Outstanding Series during
that Settlement Period to the Trust's bank statements.
-- Agreed the total amount of cash Collections allocated to the
Series Principal Collection Sub-subaccount and Series
Non-Principal Collection Sub-subaccount of each Outstanding
Series during that Settlement Period to the Trust's bank
statement.
-- Agreed the aggregate amount of Recoveries received during that
Settlement Period to the Servicer's system-generated reports.
-- For each Obligor the amount of whose Receivables is greater than
2.5% of the
3
aggregate amount of all Receivables, agreed the aggregate amount
of Receivables with respect to such Obligor to the Sellers'
system-generated reports.
With respect to the amount appearing as Defaulted Receivables:
-- Agreed the total Defaulted Receivables to the Servicers'
system-generated reports.
-- From a random sample of 10% (but at least 10) of Defaulted
Receivables during the month, agreed the default amount to the
Obligor's file in the Servicer's system.
With respect to the amount appearing as Adjustment Amounts:
-- Agreed the Adjustment Amount amount to a schedule prepared by the
[Master] Servicer.
With respect to the amount appearing as Eligible Receivables:
-- Recalculated the mathematical accuracy of the Company's schedule
of Eligible Receivables.
-- Agreed the amounts appearing in this schedule to a Statement
generated by the Servicers' system.
With respect to the amounts appearing as Invested Percentages applicable
during that Settlement Period:
-- Agreed amounts to schedules provided by the Servicer.
4
C. With respect to each of the Daily Reports, agreed amounts to the
system-generated reports provided by each Originator for such day.
D. Agreed the calculation used in computing the aggregate Servicing Fee to the
Agreement and agreed amounts appearing in the schedule of Servicing Fee
prepared by the Servicer to the Statements.
Because the above procedures do not constitute an audit made in
accordance with generally accepted auditing standards, we do not express an
opinion on any of the elements referred to above. Had we performed additional
procedures or had we made an audit of the financial statements of the Company in
accordance with generally accepted auditing standards, (other) matters might
have come to our attention that would have been reported to you. This report
relates only to the elements specified above and does not extend to any
financial statements of the Company taken as a whole.
This report is solely for your information and is not to be used,
referred to or distributed for any other purpose.