EXHIBIT 10.9
EXECUTION COPY
RECEIVABLES SALE AGREEMENT
Among
LFI RECEIVABLES CORPORATION,
THE SELLERS NAMED HEREIN
and
THE SERVICERS NAMED HEREIN
Dated as of August 5, 1996
TABLE OF CONTENTS
Page
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ARTICLE I
Definitions
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SECTION 1.01. Defined Terms . . . . . . . . . . . 1
SECTION 1.02. Other Definitional Provisions . . . 6
ARTICLE II
Purchase and Sale of Receivables
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SECTION 2.01. Purchase and Sale of Receivables . 7
SECTION 2.02. Purchase Price . . . . . . . . . . 10
SECTION 2.03. Payment of Purchase Price . . . . . 10
SECTION 2.04. No Repurchase . . . . . . . . . . . 12
SECTION 2.05. Rebates, Adjustments, Returns,
Reductions and Modifications . . 12
SECTION 2.06. Payments in Respect of and
Indemnification for Ineligible
Receivables . . . . . . . . . . 12
SECTION 2.07. Certain Charges . . . . . . . . . . 14
SECTION 2.08. Certain Allocations . . . . . . . . 14
ARTICLE III
Conditions to Purchase and Sale
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SECTION 3.01. Conditions Precedent to the
Company's Initial Purchase of
Receivables . . . . . . . . . . 15
SECTION 3.02. Conditions Precedent to All the
Contents p.2
Page
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Company's Purchases of
Receivables . . . . . . . . . . 16
SECTION 3.03. Conditions Precedent to Sellers'
Obligations on the Effective Date 17
SECTION 3.04. Conditions Precedent to All the
Sellers' Obligations . . . . . . 17
SECTION 3.05. Conditions Precedent to the
Addition of a Seller . . . . . . 18
ARTICLE IV
Representations and Warranties
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SECTION 4.01. Representations and Warranties of
the Sellers Relating to the
Sellers . . . . . . . . . . . . 20
SECTION 4.02. Representations and Warranties of
the Sellers Relating to the
Receivables . . . . . . . . . . 25
SECTION 4.03. Representations and Warranties of
the Company . . . . . . . . . . 26
ARTICLE V
Affirmative Covenants
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SECTION 5.01. Certificates; Other Information . . 28
SECTION 5.02. Compliance with Law and Policies . 28
SECTION 5.03. Preservation of Corporate
Existence . . . . . . . . . . . 28
SECTION 5.04. Separate Corporate Existence . . . 28
SECTION 5.05. Inspection of Property; Books and
Records; Discussions . . . . . . 30
SECTION 5.06. Location of Records . . . . . . . . 30
SECTION 5.07. Computer Files . . . . . . . . . . 30
SECTION 5.08. Payment of and Compliance with
Obligations . . . . . . . . . . 30
Contents p.3
Page
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SECTION 5.09. Collections . . . . . . . . . . . . 31
SECTION 5.10. Furnishing Copies, Etc. . . . . . . 31
SECTION 5.11. Obligations with Respect to
Obligors and Receivables . . . . 32
SECTION 5.12. Responsibilities of the Sellers . . 32
SECTION 5.13. Assessments . . . . . . . . . . . . 32
SECTION 5.14. Further Action . . . . . . . . . . 33
SECTION 5.15. Sale of Receivables . . . . . . . . 33
SECTION 5.16. Baybank Depository Agreement . . . 34
SECTION 5.17. Discharge or Bonding of Liens . . 34
ARTICLE VI
Negative Covenants
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SECTION 6.01. Limitations on Transfers of
Receivables, Etc. . . . . . . . 34
SECTION 6.02. Extension or Amendment of
Receivables . . . . . . . . . . 34
SECTION 6.03. Change in Payment Instructions to
Obligors . . . . . . . . . . . . 34
SECTION 6.04. Change in Name . . . . . . . . . . 35
SECTION 6.05. Policies . . . . . . . . . . . . . 35
SECTION 6.06. Modification of Ledger . . . . . . 35
SECTION 6.07. Accounting for Purchases . . . . . 36
SECTION 6.08. Instruments . . . . . . . . . . . . 36
SECTION 6.09. Ineligible Receivables . . . . . . 36
SECTION 6.10. Business of the Seller . . . . . . 36
SECTION 6.11. Limitation on Fundamental Changes . 37
ARTICLE VII
Purchase Termination Events
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SECTION 7.01. Purchase Termination Events . . . . 37
SECTION 7.02. Remedies . . . . . . . . . . . . . 40
Contents p.4
Page
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ARTICLE VIII
Seller Note
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SECTION 8.01. Seller Note . . . . . . . . . . . . 42
SECTION 8.02. Restrictions on Transfer of Seller
Note . . . . . . . . . . . . . . 43
SECTION 8.03. Discretion; Aggregate Amount . . . 43
ARTICLE IX
Miscellaneous
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SECTION 9.01. Further Assurances . . . . . . . . 43
SECTION 9.02. Payments . . . . . . . . . . . . . 44
SECTION 9.03. Costs and Expenses . . . . . . . . 44
SECTION 9.04. Successors and Assigns . . . . . . 46
SECTION 9.05. Governing Law . . . . . . . . . . . 46
SECTION 9.06. No Waiver; Cumulative Remedies . . 46
SECTION 9.07. Amendments and Waivers . . . . . . 46
SECTION 9.08. Severability . . . . . . . . . . . 47
SECTION 9.09. Notices . . . . . . . . . . . . . . 47
SECTION 9.10. Counterparts . . . . . . . . . . . 47
SECTION 9.11. Waivers of Jury Trial . . . . . . . 48
SECTION 9.12. Jurisdiction; Consent to Service of
Process . . . . . . . . . . . . 48
SECTION 9.13. Addition of Sellers . . . . . . . . 49
SECTION 9.14. Termination of Seller . . . . . . . 49
SECTION 9.15. No Bankruptcy Petition . . . . . . 50
SECTION 9.16. Termination . . . . . . . . . . . . 51
SECTION 9.17. Construction of Agreement . . . . . 51
EXHIBITS
Exhibit A Form of Seller Note
Exhibit B Form of Additional Seller/
Servicer Supplement
Contents p.5
SCHEDULES
Schedule 1 Sellers and Servicers
Schedule 2 Receivables
Schedule 3 Lockboxes
Schedule 4 Location of Chief Executive Offices; Location of
Books and Records
Schedule 5 Names
Schedule 6 Discounted Percentage
EXECUTION COPY
RECEIVABLES SALE AGREEMENT dated as of August 5,
1996 (this "Agreement"), among each seller and
servicer listed on Schedule 1 hereto (in their
capacity as sellers, the "Sellers" and in their
capacity as servicers, the "Servicers"), and LFI
RECEIVABLES CORPORATION, a Delaware corporation
(the "Company").
W I T N E S S E T H :
WHEREAS, in the ordinary course of business, the Sellers generate
Receivables (such term and all other capitalized terms being defined or
referenced in Article I);
WHEREAS, the Sellers are willing to sell to the Company, and the
Company is willing to purchase from the Sellers, all the Sellers' right, title
and interest in, to and under the Receivables now existing or hereafter created
and in the rights of the Sellers in, to and under all Related Property; and
WHEREAS, the Master Servicer, the Company and The Chase Manhattan
Bank, as Trustee, have entered into a Pooling Agreement dated as of the date
hereof (such agreement, as it may be amended, modified or otherwise supplemented
from time to time, being the "Pooling Agreement") in order to create a master
trust into which the Company will transfer all its right, title and interest in,
to and under the Receivables and certain other assets now or hereafter owned by
the Company.
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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. Defined Terms. Capitalized terms defined or referenced
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in the Pooling Agreement shall be used herein as therein defined (unless other-
wise defined or referenced herein), and the following terms shall have the
following meanings:
"Adjustment Amount" shall have the meaning specified in Section 2.06.
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"Applicable Insolvency Laws" has the meaning specified in
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Section 7.01(d).
"Collections" shall mean all collections and all amounts received in
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respect of the Receivables sold to the Company, including Recoveries, Adjustment
Payments, indemnification payments made by the Master Servicer or, any Servicer
and payments received in respect of Dilution Adjustments, together with all
collections received in respect of the Related Property in the form of cash,
checks, wire transfers or any other form of cash payment, and all proceeds of
Receivables and collections thereof (including, without limitation, collections
evidenced by an account, note, instrument, letter of credit, security, contract,
security agreement, chattel paper, general intangible or other evidence of
indebtedness or security, whatever is received upon the sale, exchange,
collection or other disposition of, or any indemnity, warranty or guaranty
payable in respect of, the foregoing and all "proceeds" as defined in
Section 9-306 of the UCC as in effect in the State of New York).
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"Discounted Percentage" shall have the meaning specified in
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Schedule 6.
"Documents" shall have the meaning specified in sub-
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section 7.02(b)(iii).
"Early Termination" shall have the meaning specified in Article VII.
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"Effective Date" shall mean August 5, 1996.
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"ERISA Affiliate" shall mean with respect to any Person, any trade or
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business (whether or not incorporated) that is a member of a group of which such
Person is a member and which is treated as a single employer under Section 414
of the Internal Revenue Code.
"Excluded Note" shall mean any Receivable (i) which originally
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represented obligations owing by the account debtor thereon to more than one
Seller, (ii) which is or will be evidenced by an instrument payable to the
Seller who will administer such Receivable, (iii) which will be treated as an
account receivable on the books and records of such Sellers until an instrument
is executed in favor of the Seller who will administer such Receivable and
thereafter will be treated as a note receivable on the books of such
administering Seller and (iv) for which payments are not at any time to be made
to a Lockbox or Lockbox Account.
"Excluded Receivables" shall mean, as of any date of determination,
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any indebtedness and payment obligations of any Person to any Seller arising
from a sale of merchandise or services by such Seller that has the attributes
set forth in any of the following paragraphs:
(a) it is owing by an Obligor that is an Affiliate of any Seller;
(b) it is owing by an Obligor that is not "located" (within the
meaning of Section 9-103(3)(d) of
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the UCC as in effect in the State of New York) in the United States
and it is not supported by an Eligible Letter of Credit;
(c) it is an Excluded Note; or
(d) it is a Receivable originated by the Beacon Hill division of
Robert Allen Fabrics, Inc.
"Indemnification Event" shall have the meaning specified in
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subsection 2.06(b).
"Ineligibility Event" shall have the meaning specified in
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Section 2.06.
"Multiemployer Plan" shall mean with respect to any Person, a multi-
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employer plan as defined in Section 4001(a)(3) of ERISA to which such Person or
any ERISA Affiliate of such Person (other than one considered an ERISA Affiliate
only pursuant to subsection (m) or (o) of Section 414 of the Internal Revenue
Code) is making or accruing an obligation to make contributions, or has within
any of the preceding five plan years made or accrued an obligation to make
contributions.
"One-Month LIBOR" shall mean for any Accrual Period after the initial
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Accrual Period, the rate per annum, as determined by the Trustee, which is the
arithmetic mean (rounded to the nearest 1/100th of 1%) of the offered rates for
U.S. Dollar deposits having a maturity of one month commencing on the first day
of such Accrual Period that appears on Page 3750 of the Telerate Service (or on
any successor or substitute page of such service, or any successor to or
substitute for such service, providing rate quotations comparable to those
currently provided on such page of the Telerate Service, as determined by the
Agent for purposes of providing interest rates applicable to U.S. Dollar
deposits having a maturity of one month in the London interbank market) at
approximately 11:00 a.m., London time, three Business Days prior to the
commencement of such
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Accrual Period. In the event that such rate is not so available at such time
for any reason, then "One-Month LIBOR" for such Accrual Period shall be the rate
at which U.S. Dollar deposits in a principal amount of not less than $1,000,000
maturing in one month are offered to the principal London office of the Agent in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, three Business Days prior to the commencement of such
Accrual Period.
"Payment Date" shall have the meaning specified in Section 2.03(a).
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"PBGC" shall mean the Pension Benefit Guaranty Corporation established
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pursuant to Subtitle A of Title IV of ERISA, or any successor thereto.
"Plan" shall mean, with respect to any Person, any pension plan (other
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than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or
Section 412 of the Internal Revenue Code which is maintained for employees of
such Person or any ERISA Affiliate of such Person.
"Pooling Agreement" shall have the meaning specified in the recitals
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hereto.
"Potential Purchase Termination Event" shall mean any condition or act
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specified in Article VII that, with the giving of notice or the lapse of time or
both, would become a Purchase Termination Event.
"Purchase Price" shall have the meaning specified in Section 2.02.
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"Purchase Termination Event" shall have the meaning specified in
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Section 7.01.
"Purchased Receivable" shall mean, at any time, any Receivable sold to
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the Company by any Seller pursuant to, and in accordance with the terms of, this
Agreement.
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"Receivable" shall mean the indebtedness and payment obligations of
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any Person to any Seller (including, without limitation, obligations evidenced
by an account, note, instrument, contract, security agreement, chattel paper,
general intangible or other evidence of indebtedness or security) arising from a
sale of merchandise or services by such Seller, including, without limitation,
any right to payment for goods sold or for services rendered, and including the
right to payment of any interest, sales taxes, finance charges, returned check
or late charges and other obligations of such Person with respect thereto, but
not including any Excluded Receivable.
"Reportable Event" shall mean any reportable event as defined in
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Section 4043(b) of ERISA or the regulations issued thereunder with respect to a
Plan (other than a Plan maintained by an ERISA Affiliate which is considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the
Internal Revenue Code).
"Sale Documents" shall mean this Agreement and the Seller Note.
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"Sale Termination Date" shall have the meaning specified in
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subsection 9.14(b).
"Seller Addition Date" shall have the meaning specified in
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Section 3.05.
"Seller Adjustment Payment" shall have the meaning specified in
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subsection 2.06(a).
"Seller Dilution Adjustment Payment" shall have the meaning specified
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in Section 2.05.
"Seller Indemnification Payment" shall have the meaning specified in
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subsection 2.06(b).
"Seller Note" shall have the meaning specified in Section 8.01.
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"Series 1996-A Supplement" shall mean the Series 1996-A Supplement,
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dated as of August 5, 1996, among the Company, the Master Servicer, The Chase
Manhattan Bank, as Agent and Initial Purchaser and The Chase Manhattan Bank, as
Trustee, as amended, supplemented or otherwise modified from time to time.
"Subordinated Notes" shall mean the 10 7/8% Senior Subordinated Notes
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due 2006 issued by Lifestyle Furnishings International Ltd. on the Effective
Date in an aggregate principal amount of not less than $200,000,000 and shall
include any substantially identical notes issued in exchange therefore after the
Effective Date, pursuant to the indenture governing such Notes.
"Transactions" shall have the meaning specified in subsection 4.01(b).
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"Withdrawal Liability" shall mean liability to a Multiemployer Plan as
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a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Other Definitional Provisions. (a) The words
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"hereof", "herein", "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 article, section, subsection, schedule and
exhibit references are to this Agreement unless otherwise specified.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto, accounting terms relating to the Sellers and the
Company, unless otherwise defined herein, shall have the respective meanings
given to them under GAAP.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
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(d) 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.
(e) 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.
(f) The words "include", "includes" or "including" shall be
interpreted as if followed, in each case, by the phrase "without limitation".
ARTICLE II
Purchase and Sale of Receivables
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SECTION 2.01. Purchase and Sale of Receivables. (a) Subject to the
---------------------------------
terms and conditions of this Agreement (including, without limitation,
Article III), each Seller hereby sells, transfers, assigns, and conveys, without
recourse (except as expressly provided herein), to the Company, all its present
and future right, title and interest in, to and under:
(i) all Receivables originated by such Seller, including those
existing at the close of business on
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the Effective Date and all such Receivables thereafter arising from time to
time until but not including the date an Early Termination occurs;
(ii) the Related Property;
(iii) all Collections; and
(iv) all rights (including rescission, replevin or reclamation)
relating to any Receivable originated by such Seller or arising therefrom.
(b) Subject to the terms and conditions of this Agreement (including,
without limitation, Article III), on the Effective Date and on the date of
creation of each newly created Receivable (but only so long as no Early
Termination shall have occurred and be continuing), all of each Seller's right,
title and interest in and to (i) in the case of the Effective Date, all then
existing Receivables originated by such Seller and all Related Property,
Collections and all rights (including rescission, replevin or reclamation) in
respect of such Receivables originated by such Seller and (ii) in the case of
each such date of creation, all such newly created Receivables originated by
such Seller and all Related Property, Collections and all rights (including
rescission, replevin or reclamation) in respect of such Receivables shall be
considered to be part of the assets that have been sold, transferred, assigned,
set over and otherwise conveyed to the Company pursuant to paragraph (a) above
without any further action by such Seller or any other Person. Anything herein
to the contrary notwithstanding, to the extent any Seller shall not have
received payment from the Company of the Purchase Price for any Receivable and
Related Property in accordance with the terms of Section 2.03, such Seller shall
give written notice to the Company and the Trustee on the Payment Date for such
Purchase to the effect that such Receivable and Related Property shall be deemed
to not have been so sold, transferred, assigned, set over or conveyed to the
Company.
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(c) The parties to this Agreement intend that, for accounting and
commercial purposes, the transactions contemplated by Section 2.01 hereby shall
be, and shall be treated as, a purchase by the Company and a sale by the Sellers
of the Purchased Receivables and not a lending transaction. All sales of
Receivables and Related Property by the Sellers hereunder shall be without
recourse to, or representation or warranty of any kind (express or implied) by,
the Sellers, except as otherwise specifically provided herein. The foregoing
sale, assignment, transfer and conveyance does not constitute and is not
intended to result in a creation or assumption by the Company of any obligation
of the Sellers or any other Person in connection with the Receivables, the
Related Property or any agreement or instrument relating thereto, including any
obligation to any Obligor. Although it is the intent of the parties to this
Agreement that the conveyance of the Sellers' right, title and interest in, to
and under the Receivables, the Related Property, Collections and all rights
(including rescission, replevin or reclamation) in respect of the Receivables
pursuant to this Agreement shall constitute purchases and sales and not loans,
in the event that any such conveyance is deemed to be a loan, it is the intent
of the parties to this Agreement that each Seller hereby grant to the Company a
perfected first priority security interest in all of such Seller's present and
future right, title and interest in, to and under the Receivables, the Related
Property, all Collections and all rights (including rescission, replevin or
reclamation) relating to any Receivable originated by such Seller or arising
therefrom and that this Agreement shall constitute a security agreement under
applicable law in favor of the Company.
(d) In connection with the foregoing conveyances, each Seller agrees
to record and file, or cause to be recorded and filed, at its own expense,
financing statements (and continuation statements with respect to such financing
statements when applicable), (i) with respect to the Receivables originated by
such Seller now existing and hereafter acquired pursuant to this Agreement by
the Company
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from such Seller and (ii) with respect to any Related Property for which a
security interest may be perfected under the relevant UCC, legislation or
similar statute by such filing, in each case meeting the requirements of
applicable law in such manner and in such jurisdictions as are necessary to
perfect and maintain perfection of the conveyance of such Receivables and any
Related Property to the Company, and to deliver to the Company on or prior to
the Effective Date (i) where available, a file-stamped copy or certified
statement of such financing statement or other evidence of such filing and
(ii) otherwise, a photocopy, certified by a Responsible Officer to be a true and
correct copy, of each such financing statement or other filing made or to be
made on or prior to the Effective Date.
(e) In connection with the foregoing sales, transfers, assignments
and conveyances, each Seller agrees at its own expense, on or prior to the
Effective Date with respect to the Receivables and any other similar receivables
originated by such Seller that it will, as agent of the Company, (i) indicate or
cause to be indicated on the computer files and other physical records (but not
including individual invoices or individual collection files) relating to such
Receivables and any such other receivables (by means of a general legend that
will automatically appear at or near the beginning of any screen, list or print-
out of such Receivables) that, unless otherwise specifically identified on such
screen, list or print-out as a receivable not so sold, transferred, assigned and
conveyed, all Receivables (and any such other receivables) included in such
screen, list or print-out and all Related Property (and any other similar
related property) have been sold, transferred, assigned and conveyed to the
Company in accordance with this Agreement and (ii) deliver or transmit or cause
to be delivered or transmitted to the Company a computer tape, diskette or data
transmission containing at least the information specified in Schedule 2 as to
all such Receivables, as of a date no later than the Cut-Off Date.
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SECTION 2.02. Purchase Price. The aggregate purchase price payable
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by the Company to the Sellers (the "Purchase Price") for Receivables and Related
Property on any Payment Date under this Agreement shall be equal to the product
of (a) the aggregate outstanding Principal Amount of Eligible Receivables as set
forth in the applicable Daily Reports and (b) the Discounted Percentage.
SECTION 2.03. Payment of Purchase Price. (a) The Company shall pay
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or provide for the Purchase Price for Receivables and Related Property (net of
the deductions referred to in Section 2.03(e)) in the manner provided below on
each day for which Daily Reports are prepared and delivered to the Company (each
such day, a "Payment Date"). Each Seller hereby appoints the related Servicer
as its agent to receive payment of the Purchase Price and hereby authorizes the
Company to make all payments due to such Seller directly to, or as directed by,
the related Servicer. Each Servicer hereby accepts and agrees to such
appointment.
(b) The Purchase Price (net of the deductions referred to in
Section 2.03(e)) for the initial purchase of Receivables hereunder shall be paid
by the Company to the Sellers or, in the case of amounts payable pursuant to
clauses (i) and (ii) below, to the Sellers or to such accounts or such Persons
as the Sellers may direct in writing (which direction may consist of standing
instructions provided by the Sellers that shall remain in effect until changed
by the Sellers in writing), as follows:
(i) to the extent available for such purpose, in cash from the net
proceeds of a transfer of such Purchased Receivables by the Company to
other Persons (including the Trustee pursuant to the Pooling Agreement);
(ii) from contributions made by Lifestyle Holdings Ltd., in its sole
discretion, to the capital of the Company in respect of Lifestyle Holdings
Ltd.'s common equity interest in the Company; and
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(iii) at the option of the Company (subject to the provisions of
Sections 8.03), by incurring Indebtedness to the Sellers evidenced by the
Seller Note.
(c) The Purchase Price (net of the deductions referred to in
Section 2.03(e)) shall be paid by the Company to the Sellers or, in the case of
amounts payable pursuant to clauses (i), (ii) and (iii) below, to the Sellers or
to such accounts or such Persons as the Sellers may direct in writing (which
direction may consist of standing instructions provided by the Sellers that
shall remain in effect until changed by the Sellers in writing), on each Payment
Date occurring after the initial purchase of Receivables hereunder as follows:
(i) to the extent available for such purpose, in cash from the net
proceeds of a transfer of such Purchased Receivables by the Company to
other Persons (including the Trustee pursuant to the Pooling Agreement);
(ii) to the extent available for such purpose, in cash from Collections
received by the Company from other Persons (including from the Trustee
pursuant to the Pooling Agreement and any Supplement thereto);
(iii) from contributions made by Lifestyle Holdings Ltd., in its sole
discretion, to the capital of the Company in respect of Lifestyle Holdings
Ltd.'s common equity interest in the Company; and
(iv) at the option of the Company (subject to the provisions of
Sections 8.03), by incurring Indebtedness to the Sellers evidenced by the
Seller Note.
(d) Any increase in the principal amount of the Seller Note, in
payment of any Purchase Price pursuant to Section 2.03(b) or (c), shall be
applied to the Purchase Price in an amount equal to such increase.
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(e) The Company shall deduct from the Purchase Price otherwise pay-
able to the Sellers on any Payment Date, any Seller Dilution Adjustment
Payments, Seller Adjustment Payments or Seller Indemnification Payments pursuant
to Section 2.05, 2.06(a) or 2.06(b), respectively.
(f) All cash payments under this Agreement shall be made not later
than 3:30 p.m. (New York City time) on the date specified therefor in same day
funds, and if to the Sellers, to the bank account for each Seller designated in
writing by the related Servicer to the Company and if to the Servicers, to the
bank account designated in writing by the Servicers to the Company.
(g) Whenever any payment to be made under this Agreement shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day. Amounts not paid when due in accordance
with the terms of this Agreement shall bear interest at a rate equal at all
times to the ABR plus 2.00% per annum, payable on demand.
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SECTION 2.04. No Repurchase. No Seller shall have any right or
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obligation under this Agreement, by implication or otherwise, to repurchase from
the Company any Purchased Receivables originated by such Seller or Related
Property or to rescind or otherwise retroactively effect any purchase of any
such Purchased Receivables or Related Property after the Payment Date relating
thereto; provided that the foregoing shall not be interpreted to limit the right
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of the Company herein to receive a Seller Adjustment Payment with respect to any
Ineligible Receivable.
SECTION 2.05. Rebates, Adjustments, Returns, Reductions and
---------------------------------------------
Modifications. From time to time a Seller may make Dilution Adjustments to
- --------------
Receivables in accordance with this Section 2.05 and Section 6.02.
Each Seller agrees to pay to the Company, on the Payment Date
immediately succeeding the date of the grant of
15
any Dilution Adjustment, the amount of any such Dilution Adjustment (a "Seller
Dilution Adjustment Payment"). The amount of any Dilution Adjustment shall be
set forth on the first Daily Report prepared after the date of the grant
thereof.
SECTION 2.06. Payments in Respect of and Indemnification for
----------------------------------------------
Ineligible Receivables. (a) If (i) any representation or warranty under
- -----------------------
subsections 4.02(a) or (b) is not true and correct as of the date specified
therein with respect to any Receivable sold to the Company or any Receivable
encompassed by the representation or warranty under subsection 4.02(c) is
determined not to be an Eligible Receivable as of its date of purchase,
(ii) there is a breach of any covenant under Section 6.01 with respect to any
Receivable or (iii) the Company's interest in any Receivable is not a first
priority perfected ownership or security interest at any time as a result of any
action taken by, or the failure to take action by, a Seller (each event referred
to in clause (i), (ii) and (iii) of this Section 2.06(a) shall be referred to
herein as an "Ineligibility Event" and any Receivable as to which an
Ineligibility Event applies shall be referred to herein as an "Ineligible
Receivable"), then the Seller that originated such Receivable agrees to pay to
the Company, upon the request of the Company or such Seller obtaining knowledge
thereof, an amount (the "Adjustment Amount") equal to the Principal Amount of
such Receivable (whether the Company paid the related Purchase Price in cash or
otherwise) less Collections received by the Company in respect of such
Receivable. Such payment shall be made on or prior to the 30th day after the
day the Company requests such payment or such Seller obtains knowledge thereof
(except that if such day is not a Business Day, then such payment shall be made
on the Business Day immediately succeeding such day); provided that in the event
--------
that (x) a Purchase Termination Event has occurred and is continuing or (y) the
Company shall be required to make a payment in respect of such Receivable
pursuant to Section 2.05 of the Pooling Agreement and the Company has
insufficient funds to make such payment,
16
such Seller shall make such payment immediately. Any payment by such Seller
pursuant to this Section 2.06(a) is referred to as a "Seller Adjustment
Payment". If, on or prior to such 30th day (or the Business Day immediately
succeeding such 30th day, as applicable), a Seller shall make a Seller
Adjustment Payment in respect of any such Ineligible Receivable, then the
Company shall have no further remedy against such Seller in respect of the
Ineligibility Event with respect to such Receivable. Upon a Seller Adjustment
Payment, the Company shall automatically agree to pay to the appropriate Seller
all Collections received with respect to such Ineligible Receivable.
(b) Special Indemnification. In addition to its obligations under
------------------------
Section 9.03 hereunder, each Seller agrees to pay, indemnify and hold harmless
the Company from any loss, liability, expense, damage or injury which may at any
time be imposed on, incurred by or asserted against the Company in any way
relating to or arising out of (i) any Eligible Receivable originated by such
Seller becoming subject to any defense, dispute, offset or counterclaim of any
kind (other than as expressly permitted by this Agreement or the Pooling
Agreement) or (ii) such Seller breaching any covenant contained in Section 5.02,
5.08, 5.09, 5.10, 6.01, 6.02, 6.03, 6.04, 6.05, 6.09 or 6.10 with respect to any
Receivable originated by it (each of the foregoing events or circumstances being
an "Indemnification Event"), and such Receivable (or a portion thereof) ceasing
to be an Eligible Receivable on the date on which such Indemnification Event
occurs. The amount of such indemnification shall be equal to the Principal
Amount of such Receivable (whether the Company paid the related Purchase Price
in cash or otherwise) less Collections received by the Company in respect of
such Receivable. Such payment shall be made on or prior to the 30th Business
Day after the day the Company requests such payment or such Seller obtains
knowledge thereof unless such Indemnification Event shall have been cured on or
before such 30th Business Day; provided, however, that in the event that (x) a
-------- -------
Purchase Termination Event has occurred and is continuing or
17
(y) the Company shall be required to make a payment with respect to such
Receivable pursuant to Section 2.05 of the Pooling Agreement and the Company has
insufficient funds to make such a payment, such Seller shall make such payment
immediately. If, on or prior to such 30th Business Day, such Seller shall make
such payment, then the Company shall have no further remedy against such Seller
in respect of such Indemnification Event. Any payment by such Seller pursuant
to this Section 2.06(b) is referred to as a "Seller Indemnification Payment".
SECTION 2.07. Certain Charges. Each of the Sellers and the Company
----------------
agree that late charge revenue, reversals of discounts, other fees and charges
and other similar items, whenever created, accrued in respect of Purchased
Receivables shall be the property of the Company notwithstanding the occurrence
of an Early Termination and all Collections with respect thereto shall continue
to be allocated and treated as Collections in respect of Purchased Receivables.
SECTION 2.08. Certain Allocations. Each Seller hereby agrees that,
--------------------
following the occurrence of an Early Termination, all Collections and other
proceeds received in respect of Receivables generated by the Sellers shall be
applied, first, to pay the outstanding Principal Amount of Purchased Receivables
-----
(as of the date of such Early Termination) of the Obligor to whom such
Collections are attributable until such Purchased Receivables are paid in full
and, second, to the Sellers to pay Receivables of such Obligor not sold to the
------
Company; provided, however, that notwithstanding the foregoing, if any Seller
-------- -------
can attribute a Collection to a specific Obligor and a specific Receivable, then
such Collection shall be applied to pay such Receivable of such Obligor.
18
ARTICLE III
Conditions to Purchase and Sale
-------------------------------
SECTION 3.01. Conditions Precedent to the Company's Initial Purchase
------------------------------------------------------
of Receivables. The obligation of the Company to purchase the Receivables and
- ---------------
the Related Property hereunder on the Effective Date from the Sellers is subject
to the conditions precedent, which may be waived by the Company, that (a) each
of the Sale Documents shall be in full force and effect and (b) the conditions
set forth below shall have been satisfied on or before the Effective Date:
(i) the Company shall have received copies of duly adopted resolutions
of the Board of Directors of each Seller, as in effect on such Effective
Date, authorizing this Agreement, the documents to be delivered by such
Seller hereunder and the transactions contemplated hereby, certified by the
Secretary or Assistant Secretary of such Seller;
(ii) the Company shall have received duly executed certificates of the
Secretary or an Assistant Secretary of each Seller, dated the Effective
Date, and in form and substance reasonably satisfactory to the Company,
certifying the names and true signatures of the officers authorized on
behalf of such Seller to sign this Agreement and any instruments or
documents in connection with this Agreement;
(iii) each Seller shall have filed and recorded or will file on such
Effective Date, at its own expense, UCC-1 financing statements with respect
to the Receivables originated by such Seller and Related Property in such
manner and in such jurisdictions as are necessary to perfect the Company's
ownership interest thereof under the UCC and delivered evidence of such
filings to the Company on or prior to such Effective Date; and all other
action necessary, in the reasonable judgment of the Company, to perfect
under
19
the UCC (to the extent applicable) the Company's ownership of the
Receivables originated by such Seller and Related Property shall have been
duly taken;
(iv) each Seller shall have delivered or transmitted to the Company,
with respect to the Receivables originated by it, a computer tape, diskette
or data transmission reasonably acceptable to the Company showing, as of a
date no later than the Cut-Off Date, at least the information specified in
Schedule 2 as to all Receivables to be transferred by such Seller to the
Company on such Effective Date;
(v) the Company shall have received reports of UCC-1 and other
searches of each Seller with respect to the Receivables originated by such
Seller and the Related Property reflecting the absence of Liens thereon,
except for (A) Liens created in connection with the sale by the Company of
such Receivables and Related Property, (B) Liens as to which the Company
has received UCC termination statements to be filed on or prior to the
Effective Date and (C) judgment liens against the Sellers in existence on
the Effective Date in an aggregate amount for all Sellers not to exceed
$25,000, which the Sellers shall cause to be fully released, discharged,
bonded or insured no later than 30 days following such Effective Date;
(vi) the Company shall be satisfied that each Seller's systems,
procedures and record keeping relating to the Purchased Receivables
originated by such Seller are sufficient and satisfactory in order to
permit the purchase and administration of such Purchased Receivables in
accordance with the terms and intent of this Agreement; and
(vii) the Company shall have received such other approvals, opinions or
documents as the Company may reasonably request.
20
SECTION 3.02. Conditions Precedent to All the Company's Purchases of
------------------------------------------------------
Receivables. The obligation of the Company to purchase any Receivable and the
- ------------
Related Property with respect thereto on each date (including the Effective
Date) shall be subject to the further conditions precedent, which may be waived
by the Company, that, on and as of the related Payment Date, the following
statements shall be true (and the acceptance by the related Seller of the
Purchase Price for such Receivable on such Payment Date shall constitute a
representation and warranty by such Seller that on such Payment Date the
statements in clauses (i) and (ii) below are true):
(i) the representations and warranties of such Seller contained in
Sections 4.01 and 4.02 shall be true and correct on and as of such Payment
Date as though made on and as of such date, except insofar as such
representations and warranties are expressly made only as of another date
(in which case they shall be true and correct as of such other date);
(ii) after giving effect to such purchase, no Purchase Termination
Event or Potential Purchase Termination Event with respect to such Seller
shall have occurred and be continuing;
(iii) after giving effect to such purchase, no Early Amortization Event
or Potential Early Amortization Event with respect to any Outstanding
Series shall have occurred and be continuing; and
(iv) the Company shall have received such other approvals, opinions or
documents as the Company may reasonably request;
provided, however, that the failure of any Seller to satisfy any of the fore-
- -------- -------
going conditions shall not prevent such Seller from subsequently selling
Receivables originated by it upon satisfaction of all such conditions.
21
SECTION 3.03. Conditions Precedent to Sellers' Obligations on the
---------------------------------------------------
Effective Date. The obligations of each Seller on the Effective Date shall be
- ---------------
subject to the conditions precedent, which may be waived by such Seller, that
such Seller shall have received on or before the Effective Date the following,
each dated such Effective Date and in form and substance satisfactory to such
Seller:
(i) a copy of duly adopted resolutions of the Board of Directors of
the Company authorizing this Agreement, the documents to be delivered by
the Company hereunder and the transactions contemplated hereby, certified
by the Secretary or Assistant Secretary of the Company; and
(ii) a duly executed certificate of the Secretary or Assistant
Secretary of the Company certifying the names and true signatures of the
officers authorized on its behalf to sign this Agreement and the other
documents to be delivered by it hereunder.
SECTION 3.04. Conditions Precedent to All the Sellers' Obligations.
-----------------------------------------------------
The obligation of each Seller to sell any Receivable on any date (including on
the Effective Date) shall be subject to the further conditions precedent, which
may be waived by such Seller, that, on the related Payment Date, the following
statement shall be true (and the payment by the Company of the Purchase Price
for such Receivable on such date shall constitute a representation and warranty
by the Company that on such Payment Date such statement is true): after giving
effect to such purchase, no Purchase Termination Event set forth in
paragraph (d) of Section 7.01 hereof, and no Early Amortization Event set forth
in paragraph (a) of Section 7.01 of the Pooling Agreement (as in effect on the
date hereof and without giving effect to any amendment or supplement to, or
modification or waiver of, or departure from, such paragraph unless, in each
case, each Seller shall have consented thereto) shall have occurred and be
continuing.
22
SECTION 3.05. Conditions Precedent to the Addition of a Seller. No
-------------------------------------------------
wholly owned, direct or indirect, Subsidiary of Furnishings International Inc.
approved by the Company as an additional Seller pursuant to Section 9.13 shall
be added as a Seller hereunder unless the conditions set forth below shall have
been satisfied on or before the date designated for the addition of such Seller
(the "Seller Addition Date"):
(i) the Company shall have received an Additional Seller Supplement
substantially in the form of Exhibit B hereto, duly executed and delivered
by such Seller;
(ii) each of the conditions precedent set forth in Section 2.08(m) of
the Pooling Agreement and in any supplement, including Section 11.16 of the
Series 1996-A Supplement shall have been satisfied;
(iii) the Company shall have received copies of duly adopted resolutions
of the Board of Directors of such Seller, as in effect on the related
Seller Addition Date, authorizing this Agreement, the documents to be
delivered by such Seller hereunder and the transactions contemplated
hereby, certified by the Secretary or Assistant Secretary of such Seller;
(iv) the Company shall have received duly executed certificates of the
Secretary or an Assistant Secretary of such Seller, dated the related
Seller Addition Date, and in form and substance reasonably satisfactory to
the Company, certifying the names and true signatures of the officers
authorized on behalf of such Seller to sign the Additional Seller
Supplement or any instruments or documents in connection with this
Agreement;
(v) a Lockbox Account with respect to Receivables to be sold by such
Seller shall have been established in the name of the Trustee;
23
(vi) such Seller shall have filed and recorded, at its own expense,
UCC-1 financing statements (and other similar instruments) with respect to
the Receivables originated by such Seller and the Related Property in such
manner and in such jurisdictions as are necessary to perfect the Company's
ownership interest thereof under the UCC and delivered evidence of such
filings to the Company on or prior to the Seller Addition Date; and all
other action necessary, in the reasonable judgment of the Company, to
perfect the Company's ownership of the Receivables originated by such
Seller shall have been duly taken;
(vii) such Seller shall have delivered or transmitted to the Company,
with respect to the Receivables originated by it, a computer tape, diskette
or data transmission reasonably acceptable to the Company showing, as of a
date no later than five Business Days preceding the related Seller Addition
Date, at least the information specified in Schedule 2 as to all
Receivables to be transferred by such Seller to the Company on the related
Seller Addition Date;
(viii) the Company shall have received reports of UCC-1 and other
searches of such Seller with respect to the Receivables originated by such
Seller and the Related Property reflecting the absence of Liens thereon,
except for (i) Liens created in connection with the sale by the Company of
such Receivables and Related Property and (ii) Liens as to which the
Company has received UCC termination statements to be filed on or prior to
the related Seller Addition Date;
(ix) the Company shall be satisfied that such Seller's systems,
procedures and record keeping relating to the Purchased Receivables
originated by such Seller are sufficient and satisfactory in order to
permit the purchase and administration of such Purchased Receivables in
accordance with the terms and intent of this Agreement; and
24
(x) the Company shall have received such other approvals, opinions or
documents as the Company may reasonably request.
ARTICLE IV
Representations and Warranties
------------------------------
SECTION 4.01. Representations and Warranties of the Sellers Relating
------------------------------------------------------
to the Sellers. Each Seller represents and warrants as to itself as follows:
- ---------------
(a) Organization; Powers. It (i) is a corporation duly 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 Seller
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 or thereby
to which it is or will be a party.
(b) Authorization. The execution, delivery and performance by such
--------------
Seller of each of the Transaction Documents to which such Seller is a party and
the other transactions contemplated hereby and thereby (collectively, the
"Transactions") (i) have been duly authorized by all requisite corporate and, if
required, stockholder action and (ii) will not (A) violate (1) any Requirement
of Law or the certificate or articles of incorporation or other constitutive
document or by-laws of any Subsidiary 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 of
25
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 Seller 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).
(c) Enforceability. This Agreement has been duly executed and
---------------
delivered by such Seller and constitutes, and each other Transaction Document to
which such Seller is a party when executed and delivered by such Seller will
constitute, a legal, valid and binding obligation of such Seller enforceable
against such Seller in accordance with its respective 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 principles of equity
(whether enforcement is sought by a proceeding in equity or at law).
(d) 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, (ii) such as have been
made or obtained and are in full force and effect and (iii) such actions,
consents, approvals and filings the failure of which to obtain or make could not
reasonably be expected to result in a Seller Material Adverse Effect; provided,
--------
however, that with respect to Receivables owing by Government Obligors, any
- -------
failure by such Seller to comply with the United States Federal
26
Nonassignment Act (Public Contracts), 41 U.S.C. Sec. 15, or Assignment of Claims
Act, 31 U.S.C. Sec. 3727, or with any similar legislation of any State shall not
constitute a breach of this subsection 4.01(d).
(e) 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 the knowledge of such Seller, threatened against or
affecting such Seller 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 Seller 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 Seller
Material Adverse Effect.
(f) Agreements. (i) Neither it nor any Subsidiary is a party to any
-----------
agreement or instrument or subject to any corporate restriction that has
resulted or could reasonably be expected to result in a Seller Material Adverse
Effect.
(ii) Neither it nor its 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 Seller Material Adverse Effect.
(g) Federal Reserve Regulations. (i) Neither it nor its Subsidiary
----------------------------
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose of buying or carrying Margin Stock.
27
(ii) No part of the proceeds from the sale of Receivables hereunder
will be used, whether directly or indirectly, and whether immediately,
incidentally or ultimately, for any purpose that entails a violation of, or that
is inconsistent with, the provisions of the Regulations of the Board, including
Regulation G, U or X.
(h) Investment Company Act. It is not an "investment company" as
-----------------------
defined in, or subject to regulation under, the Investment Company Act of 1940.
(i) Tax Returns. It and each Subsidiary has filed or caused to be
------------
filed all Federal, state and other material tax returns or materials required to
have been filed by it and has paid or caused to be paid all taxes due and pay-
able by it and all assessments received by it to the extent that nonpayment
could reasonably be expected to result in a Seller Material Adverse Effect.
(j) Employee Benefit Plans. Except to the extent failure to comply
-----------------------
could not reasonably be expected to result in a Seller Material Adverse Effect,
such Seller and its ERISA Affiliates are in compliance in all material respects
with the applicable provisions of ERISA and the Code and the regulations and
published interpretations thereunder. No Reportable Event has occurred or is
reasonably expected to occur that, when taken together with all other such
Reportable Events, could reasonably be expected to result in a Seller Material
Adverse Effect.
(k) Accounting Treatment. It will not prepare any financial
---------------------
statements that shall account for the transactions contemplated hereby, nor will
it in any other respect (other than for tax purposes) account for the trans-
actions contemplated hereby, in a manner that is inconsistent with the Company's
ownership interest in the Receivables.
(l) Indebtedness to Company. Immediately prior to consummation of
------------------------
the transactions contemplated hereby on
28
such Effective Date, it had no outstanding Indebtedness to the Company other
than amounts permitted by this Agreement.
(m) Lockboxes. Set forth in Schedule 3 is a complete and accurate
----------
description as of the Effective Date of each Lockbox Account currently
maintained by each of the Sellers. Each of the Lockbox Agreements to which such
Seller is to be a Party, once entered into, shall be the legal, valid and
binding obligation of such Seller, enforceable against such Seller in accordance
with its terms.
(n) Chief Executive Office. The offices at which each Seller keeps
-----------------------
its records concerning the Receivables originated by it either (x) are located
as set forth on Schedule 4 hereto or (y) such Seller has notified the Company of
the location thereof in accordance with Section 5.06. The chief executive
office of such Seller is listed opposite its name on Schedule 4 and is the place
where such Seller is "located" for the purposes of Section 9-103(3)(d) of the
UCC as in effect in the State of New York. As of the Effective Date, the state
and county where the chief executive office of such Seller is "located" for the
purposes of 9-103(3)(d) of the UCC as in effect in the State of New York has not
changed in the past four months, except for Furnishings International Inc. whose
chief executive office was located at 1314 Hanley Industrial Court, St. Louis,
MO 63144, up to the day prior to the Effective Date. Furnishings International
Inc. will not have its chief executive office in Missouri after the Effective
Date.
(o) Bulk Sales Act. No transaction contemplated hereby with respect
---------------
to such Seller requires compliance with, or will be subject to avoidance under,
any bulk sales act or similar law.
(p) Names. The legal name of such Seller is as set forth in this
------
Agreement. It has no trade names, fictitious names, assumed names or "doing
business as" names except as set forth on Schedule 5.
29
(q) Solvency. No Insolvency Event with respect to such Seller has
---------
occurred and the sale of the Receivables by it to the Company has not been made
in contemplation of the occurrence thereof. Both prior to and after giving
effect to the transactions occurring on the Effective Date and after giving
effect to each subsequent transaction contemplated hereunder, (i) the fair value
of the assets of such Seller at a fair valuation will exceed the debts and
liabilities, subordinated, contingent or otherwise, of such Seller; (ii) the
present fair salable value of the property of such Seller will be greater than
the amount that will be required to pay the probable liability of such Seller on
its debts and other liabilities, subordinated, contingent or otherwise, as such
debts and other liabilities become absolute and matured; (iii) such Seller will
be able to pay its debts and liabilities, subordinated, contingent or otherwise,
as such debts and liabilities become absolute and matured; and (iv) such Seller
will not have unreasonably small capital with which to conduct the business in
which it is engaged as such business is now conducted and is proposed to be
conducted. For all purposes of clauses (i) through (iv) above, the amount of
contingent liabilities at any time shall be computed as the amount that, in the
light of all the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured liability.
Such Seller does not intend to, nor does it believe that it will, incur debts
beyond its ability to pay such debts as they mature, taking into account the
timing of and amounts of cash to be received by it and the timing of the amounts
of cash to be payable on or in respect of its Indebtedness.
(r) No Purchase Termination Event. As of the Effective Date, no
------------------------------
Purchase Termination Event or Potential Purchase Termination Event with respect
to such Seller has occurred and is continuing.
(s) No Fraudulent Transfer. Such Seller is not entering into this
-----------------------
Agreement with the intent (whether actual or constructive) to hinder, delay, or
defraud its present or
30
future creditors and is receiving reasonably equivalent value and fair
consideration for the Receivables originated by it being transferred hereunder.
(t) Liabilities. Other than the liabilities, commitments or
------------
obligations (whether absolute, accrued, contingent or otherwise) arising under
or in respect of the Transaction Documents, the Credit Agreement, the
Subordinated Notes or any documents executed in connection with any of the
foregoing, such Seller does not have any liabilities, commitments or obligations
(whether absolute, accrued, contingent or otherwise), whether due or to become
due which would be reasonably likely to have a Seller Material Adverse Effect.
(u) Collection Procedures. Such Seller has in place procedures
----------------------
pursuant to the Transaction Documents which are either necessary or advisable to
ensure the timely collection of Receivables originated by it.
(v) Ownership. Except in the case of Furnishings International Inc.,
----------
all of its issued and outstanding capital stock is wholly owned, directly or
indirectly, legally and beneficially, by Furnishings International Inc.
SECTION 4.02. Representations and Warranties of the Sellers Relating
------------------------------------------------------
to the Receivables. Each Seller hereby represents and warrants to the Company
- -------------------
on each Payment Date that with respect to the Receivables originated by it being
paid for as of such date:
(a) Receivables Description. As of the Cut-Off Date, the computer
------------------------
tape, diskette or data transmission delivered or transmitted pursuant to
Section 2.01(e) sets forth in all material respects an accurate and
complete listing of all Receivables sold to the Company as of the Cut-Off
Date and the information contained therein in accordance with Schedule 2
with respect to each such Receivable is true and correct as of the Cut-Off
Date. As of the Cut-Off Date, the aggregate
31
amount of Receivables owned by the Sellers is accurately set forth on such
computer tape, diskette or data transmission.
(b) No Liens. Each Receivable existing on the Initial Closing Date
---------
or, in the case of Receivables sold to the Company after the Initial
Closing Date, on the date that each such Receivable shall have been sold to
the Company, has been conveyed to the Company free and clear of any Liens,
except for Permitted Liens specified in clause (i) of the definition
thereof.
(c) Eligible Receivable. On the Initial Closing Date, each
--------------------
Receivable that is represented to be an Eligible Receivable sold to the
Company on such date is an Eligible Receivable on the Initial Closing Date
and, in the case of Receivables sold to the Company after the Initial
Closing Date, each such Receivable that is represented to be an Eligible
Receivable sold to the Company on such later date is an Eligible Receivable
on such later date.
(d) Filings. On or prior to the Effective Date, all filings and
--------
other acts necessary (including but not limited to all filings and other
acts necessary or advisable under the UCC) shall have been made or
performed in order to grant the Company on the Effective Date a first
priority perfected ownership or security interest in respect of all
Receivables.
SECTION 4.03. Representations and Warranties of the Company. The
----------------------------------------------
Company represents and warrants as to itself as follows:
(a) Organization; Powers. The Company (i) is a corporation duly
---------------------
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 quali-
32
fied 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 would
not have a Company 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
or thereby to which it is or will be a party.
(b) Authorization. The execution, delivery and performance by the
--------------
Company of each of the Transactions (i) have been duly authorized by all
requisite corporate and, if required, stockholder action and (ii) will not
(A) violate (1) any Requirement of Law or (2) any provision of any Transaction
Document or any other material Contractual Obligation to which the Company is a
party or by which it or any of its 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 Transaction Document or any other material Contractual Obligation 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 the Company (other than
any Lien created hereunder or contemplated or permitted hereby).
(c) Enforceability. This Agreement has been duly executed and
---------------
delivered by the Company and constitutes, and each other Transaction Document to
which the Company is a party when executed and delivered by the Company will
constitute, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its respective 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 principles of equity
whether enforcement is sought by a proceeding in equity or at law.
33
(d) Accounting Treatment. The Company will not prepare any financial
---------------------
statements that shall account for the transactions contemplated hereby, nor will
it in any other respect (other than for tax purposes) account for the
transactions contemplated hereby, in a manner that is inconsistent with the
Company's ownership interest in the Receivables.
ARTICLE V
Affirmative Covenants
---------------------
Each Seller hereby agrees that, so long as there are any amounts out-
standing with respect to Purchased Receivables originated by it previously sold
by such Seller to the Company or until an Early Termination, whichever is later,
such Seller shall:
SECTION 5.01. Certificates; Other Information. Furnish to the
--------------------------------
Company:
(a) not later than 120 days after the end of each fiscal year and not
later than 90 days after the end of each of the first three fiscal quarters
of each fiscal year, a certificate of a Responsible Officer of the Seller
stating that, to the knowledge of such Responsible Officer (after due
inquiry), such Seller during such period has observed or performed all of
its covenants and other agreements, and satisfied every condition,
contained in the Sale Documents to which it is a party to be observed,
performed or satisfied by it, and that such Responsible Officer has
obtained no knowledge of any Purchase Termination Event or Potential
Purchase Termination Event except as specified in such certificate; and
(b) promptly, such additional financial and other information as the
Company may from time to time reasonably request.
34
SECTION 5.02. Compliance with Law and Policies. (i) Comply with all
---------------------------------
Requirements of Law and material Contractual Obligations applicable to it.
(ii) Perform its obligations in accordance and compliance with the
Policies, as amended from time to time in accordance with the Transaction
Documents, in regard to the Receivables originated by it and the Related
Property.
SECTION 5.03. Preservation of Corporate Existence. (i) Preserve and
------------------------------------
maintain its corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation and (ii) qualify and remain qualified in good
standing as a foreign corporation in each jurisdiction where the nature of its
business so requires, except where the failure so to qualify would not,
individually or in the aggregate with other such failures, have a Seller
Material Adverse Effect.
SECTION 5.04. Separate Corporate Existence.
-----------------------------
(i) Maintain its deposit account or accounts, separate from those of
the Company and ensure that its funds will not be diverted to the Company, nor
will such funds be commingled with the funds of the Company;
(ii) To the extent that it shares any officers or other employees with
the Company, the salaries of and the expenses related to providing benefits to
such officers and other employees shall be fairly allocated among it and the
Company, and it and the Company shall bear their fair shares of the salary and
benefit costs associated with all such common officers and employees;
(iii) To the extent that it jointly contracts with the Company to do
business with vendors or service providers or to share overhead expenses, the
costs incurred in so doing shall be allocated fairly between it and the Company,
and it and the Company shall bear their fair shares of such costs. To the
extent that it contracts or does business
35
with vendors or service providers where the goods and services provided are
partially for the benefit of the Company, the costs incurred in so doing shall
be fairly allocated between it and the Company in proportion to the benefit of
the goods or services each is provided, and it and the Company shall bear their
fair shares of such costs. All material transactions between it and the
Company, whether currently existing or hereafter entered into, shall be only on
an arm's length basis;
(iv) Maintain office space separate from the office space of the
Company (but which may be located at the same address as the Company). To the
extent that it and the Company have offices in the same location, there shall be
a fair and appropriate allocation of overhead costs between them, and each shall
bear its fair share of such expenses;
(v) Issue financial statements separate from any financial statements
issued by the Company;
(vi) Not assume or guarantee any of the liabilities of the Company;
and
(vii) Take, or refrain from taking, as the case may be, all other
actions that are necessary to be taken or not to be taken in order (x) to ensure
that the assumptions and factual recitations set forth in the Specified
Bankruptcy Opinion Provisions remain true and correct with respect to it (and,
to the extent within its control, to ensure that the assumptions and factual
recitations set forth in the Specified Bankruptcy Opinion Provisions remain true
and correct with respect to the Company) and (y) to comply with those procedures
described in such provisions that are applicable to it.
SECTION 5.05. Inspection of Property; Books and Records; Discussions.
-------------------------------------------------------
Keep proper books of records and account in which full, true and correct entries
in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its business
36
and activities; and permit representatives of the Company upon reasonable
advance notice to visit and inspect any of its properties and examine and make
abstracts from any of its books and records during normal business hours on any
Business Day and as often as may reasonably be requested, subject to such
Seller's security and confidentiality requirements and to discuss the business,
operations, properties and financial and other condition of such Seller with
officers and employees of such Seller and with its Independent Public
Accountants.
SECTION 5.06. Location of Records. Keep its chief place of business
--------------------
and chief executive office, and the offices where it keeps the records
concerning the Purchased Receivables (and all original documents relating
thereto), at the locations referred to for it on Schedule 4 hereto or upon
30 days' prior written notice to the Company, at such other locations in a
jurisdiction where all action required by Section 5.14 shall have been taken and
completed and be in full force and effect; provided, however, that the Rating
-------- -------
Agency shall be notified of any such changes in location and such location shall
not be changed to a state which is within the Tenth Circuit unless it delivers
an opinion of counsel reasonably acceptable to the Rating Agencies to the effect
that Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir. 1993), is no
-----------------------------------
longer controlling precedent in the Tenth Circuit.
SECTION 5.07. Computer Files. At its own cost and expense, retain
---------------
the ledger used by it as a master record of the Obligors and retain copies of
all documents relating to each Obligor as custodian and agent for the Company
and other Persons with interests in the Purchased Receivables originated by it.
SECTION 5.08. Payment of and Compliance with Obligations. Pay, dis-
-------------------------------------------
charge or otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all its obligations of whatever nature, except
where the amount or validity thereof is currently being
37
contested in good faith by appropriate proceedings and reserves in conformity
with GAAP with respect thereto have been provided on its books or except where
the failure to so pay, discharge or otherwise satisfy such obligations would not
have a Seller Material Adverse Effect. Such Seller shall defend the right,
title and interest of the Company in, to and under the Receivables originated by
it and the Related Property, whether now existing or hereafter created, against
all claims of third parties claiming through such Seller. Such Seller will duly
fulfill all obligations on its part to be fulfilled under or in connection with
each Receivable originated by it and will do nothing to impair the rights of the
Company in such Receivable.
SECTION 5.09. Collections. Instruct each Obligor to make payments in
------------
respect of its Receivables to a Lockbox or a Lockbox Account or by wire transfer
to the applicable Collection Account and to comply in all material respects with
procedures with respect to Collections reasonably specified from time to time by
the Company. In the event that any payments in respect of any such Receivables
are made directly to such Seller (including, without limitation, any employees
thereof or independent contractors employed thereby), such Seller 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 Seller shall hold such payments in
trust as custodian for the Company and the Trustee.
SECTION 5.10. Furnishing Copies, Etc. Furnish to the Company:
-----------------------
(a) within five Business Days of the Company's request, a certificate
of the chief financial officer of such Seller or of the related Servicer,
on behalf of such Seller, certifying, as of the date thereof, to the
knowledge of such officer, that no Purchase Termination Event has occurred
and is continuing or if one has so occurred, specifying the nature and
extent thereof and
38
any corrective action taken or proposed to be taken with respect thereto;
(b) promptly after a Responsible Officer of such Seller obtains
knowledge of the occurrence of any Purchase Termination Event or Potential
Purchase Termination Event, written notice thereof;
(c) promptly following request therefor, such other information,
documents, records or reports regarding or with respect to the Purchased
Receivables of such Seller, as the Company may from time to time reasonably
request;
(d) promptly after a Responsible Officer of such Seller obtains
knowledge of the occurrence thereof, written notice of any event of default
or default under any other Sale Document; and
(e) promptly upon determining that any Purchased Receivable originated
by it designated as an Eligible Receivable on the applicable Daily Report
or Monthly Settlement Statement was not an Eligible Receivable as of the
date provided therefor, written notice of such determination.
SECTION 5.11. Obligations with Respect to Obligors and Receivables.
-----------------------------------------------------
Take all actions on its part reasonably necessary to maintain in full force and
effect its rights under all contracts relating to the Purchased Receivables
originated by it.
SECTION 5.12. Responsibilities of the Sellers. Notwithstanding any-
--------------------------------
thing herein to the contrary, (i) such Seller shall perform or cause to be
performed all its obligations under the Policies related to the Purchased
Receivables to the same extent as if such Purchased Receivables had not been
transferred to the Company hereunder, (ii) the exercise by the Company of any of
its rights hereunder shall not relieve such Seller of its obligations
39
with respect to such Purchased Receivables and (iii) except as provided by law,
the Company shall not have any obligation or liability with respect to any
Purchased Receivables, nor shall the Company be obligated to perform any of the
obligations or duties of such Seller thereunder.
SECTION 5.13. Assessments. Promptly pay and discharge all taxes,
------------
assessments, levies and other governmental charges imposed on it except such
taxes, assessments, levies and charges which are being contested in good faith
and for which such Seller has set aside on its books adequate reserves.
SECTION 5.14. Further Action. In addition to the foregoing:
---------------
(a) Such Seller agrees that from time to time, at its expense, it
will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary in such Seller's reason-
able judgment or that the Company may reasonably request, in order to more
fully effect the purposes of this Agreement and the transfer of the
Receivables hereunder, to protect or more fully evidence the Company's
right, title and interest in the Purchased Receivables, or to enable the
Company to exercise or enforce any of its rights in respect thereof. With-
out limiting the generality of the foregoing, the Seller will upon the
request of the Company (i) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or notices,
as may be necessary or, in the opinion of the Company, advisable and
(ii) obtain the agreement of any Person having a Lien on any Receivables
owned by such Seller (other than any Lien created or imposed hereunder or
under the Pooling Agreement or any Permitted Lien) to release such Lien
upon the purchase of any such Receivables by the Company.
40
(b) Such Seller hereby irrevocably authorizes the Company to file one
or more financing or continuation statements (and other similar
instruments), and amendments thereto, relative to all or any part of the
Purchased Receivables and the Related Property sold or to be sold by such
Seller without the signature of such Seller to the extent permitted by
applicable law.
(c) If such Seller fails to perform any of its agreements or
obligations under this Agreement, the Company may (but shall not be
required to) perform, or cause performance of, such agreements or
obligations, and the expenses of the Company incurred in connection there-
with shall be payable by such Seller as provided in Section 9.03. The
Company agrees promptly to notify such Seller after any such performance;
provided, however, that the failure to give such notice shall not affect
-------- -------
the validity of any such performance.
SECTION 5.15. Sale of Receivables. Sell Receivables solely in
--------------------
accordance with the terms of this Agreement.
SECTION 5.16. BayBank Depository Agreement. Robert Allen Fabrics,
-----------------------------
Inc., as Seller and Servicer, will take all reasonably necessary steps to
establish a lockbox account to replace the BayBank Depository Agreement as soon
as reasonably possible.
SECTION 5.17. Discharge or Bonding of Liens. Such Seller shall cause
------------------------------
the judgment Liens described in clause (b)(v)(C) of Section 3.01 and clause (i)
of the definition of "Permitted Liens" affecting such Seller or any of its
properties to be fully released, discharged, bonded or insured no later than 30
days following the Effective Date.
41
ARTICLE VI
Negative Covenants
------------------
Each Seller hereby agrees that, so long as there are any amounts out-
standing with respect to Purchased Receivables originated by it previously sold
by such Seller to the Company or until an Early Termination with respect to such
Seller, whichever is later, such Seller shall not, directly or indirectly:
SECTION 6.01. Limitations on Transfers of Receivables, Etc. At any
---------------------------------------------
time sell, transfer or otherwise dispose of any of the Receivables, Related
Property or the proceeds thereof pursuant to:
(i) any Lien Creation except for Permitted Liens; or
(ii) any Investment.
SECTION 6.02. Extension or Amendment of Receivables. Extend, make
--------------------------------------
any Dilution Adjustment to, rescind, cancel, amend or otherwise modify, or
attempt or purport to extend, amend or otherwise modify, the terms of any
Purchased Receivables, except (a) in accordance with the terms of the Policies,
(b) as required by any Requirement of Law or (c) in the case of Dilution
Adjustments, upon making a Seller Dilution Adjustment Payment pursuant to
Section 2.05.
SECTION 6.03. Change in Payment Instructions to Obligors. Except as
-------------------------------------------
otherwise provided in Section 5.15, instruct any Obligor of any Purchased
Receivables to make any payments with respect to any Receivables other than, in
accordance with Section 5.09, to a Lockbox, a Lockbox Account or by wire
transfer to the Collection Account; provided, however, that, in accordance with
-------- -------
Section 2.03 of the Servicing Agreement, (i) it may terminate any Lockbox
Agreements or Lockbox Accounts and (ii) it may execute
42
additional Lockbox Agreements or Lockbox Accounts and instruct Obligors to make
payments in respect of any Receivables to such additional accounts; provided,
--------
however, upon the satisfaction of the Rating Agency Condition (or, if no
- -------
Outstanding Series has been rated by a Rating Agency, with the consent of the
Agent) the Seller may enter into any amendments or modifications of a Lockbox
Agreement that the Seller reasonably deems necessary to conform such Lockbox
Agreement to the cash management system of the Company or such Seller.
SECTION 6.04. Change in Name. Change its name, use an additional
---------------
name, or change its identity or corporate structure in any manner which would or
might make any financing statement or continuation statement (or other similar
instrument) relating to this Agreement seriously misleading within the meaning
of Section 9-402(7) of the UCC, or impair the perfection of the Company's
interest in any Receivable under any other similar law, without 30 days' prior
written notice to the Company.
SECTION 6.05. Policies. Make any change or modification (or permit
---------
any change or modification to be made) in any material respect to the Policies,
except (i) if such changes or modifications are necessary under any Requirement
of Law, or (ii) if the Rating Agency Condition is satisfied with respect
thereto; 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 which 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 6.06. Modification of Ledger. Delete or otherwise modify the
-----------------------
marking on the ledger referred to in Section 2.01(e).
43
SECTION 6.07. Accounting for Purchases. Prepare any financial
-------------------------
statements which shall account for the transactions contemplated hereby (other
than capital contributions and the Seller Note contemplated hereby) in any
manner other than as a sale of the Purchased Receivables originated by such
Seller to the Company or in any other respect account for or treat the
transactions contemplated hereby (including for financial accounting purposes,
except as required by law) (other than capital contributions and the Seller Note
contemplated hereby) in any manner other than as sales of the Purchased
Receivables originated by such Seller to the Company; provided, however, that
-------- -------
this subsection shall not apply for any tax or tax accounting purposes.
SECTION 6.08. Instruments. Subject to the delivery requirements set
------------
forth in Section 2.01(b) of the Pooling Agreement, take any action to cause any
Receivable not evidenced by an "instrument" (as defined in the UCC as in effect
in the State of New York or other similar statute or legislation) upon
origination to become evidenced by an instrument, except in connection with the
enforcement or collection of an overdue Receivable.
SECTION 6.09. Ineligible Receivables. Without the prior written
-----------------------
approval of the Company, take any action to cause, or which would permit, a
Receivable that was designated as an Eligible Receivable on the Payment Date
relating to such Receivable to cease to be an Eligible Receivable, except as
otherwise expressly provided by this Agreement.
SECTION 6.10. Business of the Seller. Fail to maintain and operate
-----------------------
the business currently conducted by such Seller and business activities reason-
ably incidental or related thereto in substantially the manner in which it is
presently conducted and operated if such failure would materially adversely
affect the interests of the Company under the Transaction Documents.
44
SECTION 6.11. Limitation on Fundamental Changes. 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, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets other than the assignments and transfers contemplated hereby.
ARTICLE VII
Purchase Termination Events
---------------------------
SECTION 7.01. Purchase Termination Events. If any of the following
----------------------------
events (herein called "Purchase Termination Events") shall have occurred and be
continuing with respect to one or more Sellers:
(a) a Seller shall fail (i) to pay any amount due pursuant to
Section 2.06 in accordance with the provisions thereof and such failure
shall continue unremedied for a period of five Business Days from the
earlier of (A) the date any Responsible Officer of such Seller obtains
knowledge of such failure and (B) the date such Seller receives notice of
such failure from the Company, the related Servicer or the Trustee or
(ii) to pay any other amount required to be paid by such Seller hereunder
within two Business Days of the date when due; or
(b) a Seller shall fail to observe or perform in any material respect
any covenant or agreement applicable to it contained herein (other than as
specified in paragraph (a) of this Section 7.01); provided that no such
--------
failure shall constitute a Purchase Termination Event under this
paragraph (b) unless such failure shall continue unremedied for a period of
30 consecutive days from the date such Seller
45
receives notice of such failure from the Company, the related Servicer or
the Trustee; or
(c) any representation, warranty, certification or statement made or
deemed made by such Seller in this Agreement or in any statement, record,
certificate, financial statement or other document delivered pursuant to
this Agreement shall prove to have been incorrect in any material respect
when made or deemed made, provided that a Purchase Termination Event shall
--------
not be deemed to have occurred under this paragraph (c) based upon a breach
of any representation or warranty set forth in Section 4.02 if such Seller
shall have complied with the provisions of Section 2.06 in respect thereof;
or
(d) (i) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Seller in an involuntary case
under the Bankruptcy Code or any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect (the Bankruptcy Code and all other
such applicable laws being collectively, "Applicable Insolvency Laws"),
which decree or order is not stayed or any other similar relief shall be
granted under any applicable federal or state law now or hereafter in
effect and shall not be stayed; (ii)(A) an involuntary case is commenced
against the Seller under any Applicable Insolvency Law now or hereafter in
effect, 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 Seller, or over
all or a substantial part of the property of the Seller, shall have been
entered, an interim receiver, trustee or other custodian of the Seller for
all or a substantial part of the property of the Seller is involuntarily
appointed, a warrant of attachment, execution or similar process is issued
against any substantial part of the property of the Seller, and (B) any
event
46
referred to in clause (ii)(A) above continues for 60 days unless dismissed,
bonded or disclosed; (iii) the Seller shall at its request have a decree or
an order for relief entered with respect to it or commence a voluntary case
under any Applicable Insolvency Law now or hereafter in effect, or shall
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 Applicable Insolvency Law, consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; (iv) the making by the Seller of any
general assignment for the benefit of creditors; (v) the inability or
failure of the Seller generally to pay its debts as such debts become due;
or (vi) the Board of Directors of the Seller authorizes action to approve
any of the foregoing; or
(e) there shall have occurred (i) an Early Amortization Event set
forth in Section 7.01 of the Pooling Agreement or (ii) the Amortization
Period with respect to all Outstanding Series shall have occurred and be
continuing; or
(f) a Seller has been terminated as Servicer following a Servicer
Default with respect to such Seller under the Servicing Agreement; or
(g) a Responsible Officer of a Seller receives notice or becomes aware
that a notice of Lien has been filed by the PBGC against such Seller, the
Company or the Trust under Section 412(n) of the Code or Section 302(f) of
ERISA for a failure to make a required installment or other payment to a
plan to which Section 412(n) of the Code or Section 302(f) of ERISA
applies; or
(h) any Lien in an amount equal to or greater than $1,000,000 has been
asserted against or imposed on, any
47
real or personal property of a Seller pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C.
Sec. 9607(l), or any equivalent or comparable state law, relating to or
arising from the costs of, response to, or investigation, remediation or
monitoring of, any environmental contamination resulting from the current
or past operations of such Seller; or
(i) a Federal tax notice of Lien affecting any Seller, in an amount
equal to or greater than $1,000,000, shall have been filed and 40 days
shall have elapsed without such notice having been effectively withdrawn or
such lien having been released or discharged.
then, (x) in the case of any Purchase Termination Event described in
paragraph (d), (e)(i), (g), (h) or (i) above, the obligation of the Company to
purchase Receivables from such Seller shall thereupon automatically terminate
without further notice of any kind, which is hereby waived by such Seller,
(y) in the case of any Purchase Termination Event described in paragraph (e)(ii)
above, the obligation of the Company to purchase Receivables from such Seller
shall thereupon terminate without notice of any kind, which is hereby waived by
such Seller unless both the Company and such Seller agree in writing that such
event shall not trigger an Early Termination hereunder and (z) in the case of
any other Purchase Termination Event, so long as such Purchase Termination Event
shall be continuing, the Company may terminate its obligation to purchase
Receivables from such Seller by written notice to such Seller (any termination
pursuant to clause (x), (y) or (z) of this Article VII is herein called an
"Early Termination"); provided, however, that in the event of an involuntary
-------- -------
petition or proceeding as described in paragraphs (d)(i) and (d)(ii) above, the
Company shall not purchase Receivables from such Seller unless such involuntary
petition or proceeding is dismissed, bonded or discharged within 60 days
48
of the filing of such petition or the commencement of such proceeding.
SECTION 7.02. Remedies. (a) If a Purchase Termination Event has
---------
occurred and is continuing, the Company (and its assignees) shall have all of
the rights and remedies provided to a secured creditor or a purchaser of
accounts under the UCC by applicable law in respect thereto.
(b) Such Seller agrees that, upon the occurrence and during the
continuation of a Purchase Termination Event under Section 7.01(d) or (e)(i):
(i) the Company (and its assignees) shall have the right at any time
to notify, or require that such Seller at such Seller's expense notify, the
respective Obligors of the Company's ownership of the Purchased Receivables
and Related Property and may direct that payment of all amounts due or to
become due under the Purchased Receivables be made directly to the Company
or its designee;
(ii) the Company (and its assignees) shall have the right to (A) sue
for collection on any Purchased Receivables or (B) sell any Purchased
Receivables to any Person for a price that is acceptable to the Company.
If required by the terms of Section 9-504 or 9-505 of the UCC (or analogous
provisions of any other similar law applicable to the Receivables), the
Company (and its assignees) may offer to sell any Purchased Receivable to
any Person, together, at its option, with all other Receivables created by
the same Obligor. Any Purchased Receivable sold hereunder (other than
pursuant to the Pooling Agreement) shall cease to be a Receivable for all
purposes under this Agreement as of the effective date of such sale;
(iii) such Seller shall, upon the Company's written request and at such
Seller's expense, (A) assemble all of such Seller's documents, instruments
and other
49
records (including credit files and computer tapes or disks) that
(1) evidence or will evidence or record Receivables sold by such Seller and
(2) are otherwise necessary or desirable to effect Collections of such
Purchased Receivables (collectively, the "Documents") and (B) deliver the
Documents to the Company or its designee at a place designated by the
Company. In recognition of such Seller's need to have access to any
Documents which may be transferred to the Company hereunder, whether as a
result of its continuing business relationship with any Obligor for
Receivables purchased hereunder or as a result of its responsibilities as a
Servicer, the Company hereby grants to such Seller an irrevocable license
to access the Documents transferred by such Seller to the Company and to
access any such transferred computer software in connection with any
activity arising in the ordinary course of such Seller's business or in
performance of such Seller's duties as a Servicer; provided that such
--------
Seller shall not disrupt or otherwise interfere with the Company's use of
and access to the Documents and its computer software during such license
period;
(iv) such Seller hereby grants to the Company an irrevocable power of
attorney (coupled with an interest) to take any and all steps in such
Seller's name necessary or desirable, in the reasonable opinion of the
Company, to collect all amounts due under the Purchased Receivables,
including, without limitation, endorsing such Seller's name on checks and
other instruments representing Collections, enforcing the Purchased
Receivables and exercising all rights and remedies in respect thereof; and
(v) upon written request of the Company, such Seller will (A) deliver
to the Company all licenses, rights, computer programs, related material,
computer tapes, disks, cassettes and data necessary for the immediate
collection of the Purchased Receivables by the Company, with or without the
participation of such
50
Seller (excluding software licenses which by their terms are not permitted
to be so delivered; provided that such Seller shall use reasonable efforts
--------
to obtain the consent of the relevant licensor to such delivery) and
(B) make such arrangements with respect to the collection of the Purchased
Receivables as may be reasonably required by the Company.
ARTICLE VIII
Seller Note
-----------
SECTION 8.01. Seller Note. On the Effective Date, the Company shall
------------
issue to the Sellers a subordinated note substantially in the form of Exhibit A
(as amended, supplemented or otherwise modified from time to time, the "Seller
Note"). The Company may incur Indebtedness evidenced by the Seller Note on any
date only (i) if such date is a Payment Date; (ii) in payment to the Sellers of
all or a portion of the Purchase Price (net of such deductions as provided in
Section 2.03(e)) for Receivables and Related Property required to be paid for by
the Company to the Sellers on such Payment Date in accordance with Section 2.02;
(iii) to the extent that cash was not available to pay such Purchase Price (net
of such deductions) in accordance with subsections 2.03(b)(i), 2.03(b)(ii),
2.03(c)(i), 2.03(c)(ii) and 2.03(c)(iii) (as applicable); and (iv) subject, in
any event, to Section 8.03. Interest on the principal amount of the Seller Note
(as such principal amount may have been increased pursuant to the following
proviso) shall accrue at One-Month LIBOR plus 2.50% per annum (or, if less, the
"Applicable Percentage" with respect to "Eurodollar Loans" (as each such term is
defined in the Credit Agreement)) from and including the Effective Date and
shall be paid on each Distribution Date with respect to amounts accrued and not
paid as of the last day of the preceding Settlement Period and the maturity date
thereof; provided, however, that, to the maximum extent permitted by law,
-------- -------
accrued interest on the
51
Seller Note which is not so paid shall be added, at the request of the Sellers,
to the principal amount of the Seller Note. The principal amount of the Seller
Note (as such principal amount may have been increased pursuant to the proviso
to the preceding sentence) shall be payable on the maturity date of the Seller
Note (unless sooner prepaid pursuant to the terms thereof and of the other
Transaction Documents). Each Seller's interest in, and all payments in respect
of, the Seller Note shall be allocated among the Sellers by the Master Servicer
pro-rata in accordance with the amount of Receivables sold by each such Seller
- --- ----
to the Company that are paid for by the incurrence of debt under the Seller
Note. Default in the payment of principal or interest under the Seller Note
shall not constitute a default or event of default or a Purchase Termination
Event hereunder, a Servicer Default under the Servicing Agreement or an Early
Amortization Event under the Pooling Agreement or any Supplement thereto.
SECTION 8.02. Restrictions on Transfer of Seller Note. Neither the
----------------------------------------
Seller Note, nor any right of the Sellers to receive payments thereunder, shall
be assigned, transferred, exchanged, pledged, hypothecated, participated or
otherwise conveyed.
SECTION 8.03. Discretion; Aggregate Amount. Anything herein to the
-----------------------------
contrary notwithstanding, no Seller shall be obligated to accept payment of any
Purchase Price in the form of Indebtedness of the Company under the Seller Note
if, after giving effect to such Indebtedness to be incurred on such date, the
aggregate principal amount of Indebtedness evidenced by the Seller Note,
incurred on or before such Payment Date and outstanding on such Payment Date
(after giving effect to all repayments thereof on or before such Payment Date)
would be more than 50% of the outstanding balance of the Receivables on such
Payment Date, unless such Seller shall be satisfied (and, for purposes hereof,
in the absence of notice to the contrary by such Seller to the Company and the
Trustee, such Seller shall be deemed satisfied) that, in the ordinary course of
its
52
business, the Company will pay the principal of, and interest on, such
Indebtedness in accordance with the terms thereof. The principal amount of
Indebtedness evidenced by the Seller Note incurred on any Payment Date shall
not, in any event, be greater than the excess, if any, of (x) the Purchase Price
for Receivables and Related Property required to be paid for by the Company on
such Payment Date pursuant to Section 2.03 over (y) the portion of such Purchase
Price paid in cash pursuant to subsections 2.03(b)(i), 2.03(b)(ii), 2.03(c)(i),
2.03(c)(ii) or 2.03(c)(iii).
ARTICLE IX
Miscellaneous
-------------
SECTION 9.01. Further Assurances. (a) Each Seller agrees, from time
-------------------
to time, to do and perform any and all acts and to execute any and all further
instruments reasonably required or requested by the Company more fully to effect
the purposes of this Agreement and the sales of the Receivables hereunder,
including, without limitation, the execution of any financing statements or
continuation statements (and other similar instruments) relating to the
Receivables for filing under the provisions of the UCC (or any other similar
law) of any applicable jurisdiction.
(b) From time to time at the request of a Seller, the Company shall
deliver to such Seller such documents, assignments, releases and instruments of
termination as such Seller may reasonably request to evidence the reconveyance
by the Company to such Seller of a Receivable pursuant to the terms of
Section 2.6; provided that the Company shall have been paid all amounts due
--------
thereunder; and the Company and the applicable Servicer shall take such action
as such Seller may reasonably request, at the expense of the Seller, to assure
that any such Receivable, the Related Property with respect thereto and the
proceeds thereof do not remain commingled with Collections hereunder.
53
SECTION 9.02. Payments. Each cash payment to be made by any of the
---------
Company or a Seller hereunder shall be made on the required payment date and in
immediately available funds at the office of the payee set forth below its
signature hereto or to such other office as may be specified by either party in
a notice to the other party hereto.
SECTION 9.03. Costs and Expenses. Each Seller agrees (a) to pay or
-------------------
reimburse the Company for all its out-of-pocket costs and expenses incurred in
connection with the preparation and execution of, and any amendment, supplement
or modification to, this Agreement, the other Sale Documents and any other
documents prepared in connection herewith and therewith, the consummation and
administration of the transactions contemplated hereby and thereby, including,
without limitation, all reasonable fees and disbursements of counsel, (b) to pay
or reimburse the Company for all its costs and expenses incurred in connection
with the enforcement or preservation of any rights under this Agreement and any
of the other Transaction Documents, including, without limitation, the
reasonable fees and disbursements of counsel to the Company, (c) to pay,
indemnify, and hold the Company harmless from, any and all recording and filing
fees and any and all liabilities with respect to, or resulting from any delay
caused by such Seller in paying, stamp, excise and other similar taxes, if any,
which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Agreement and any such
other documents, and (d) to pay, indemnify, and hold the Company harmless from
and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever (i) which may at any time be imposed on, incurred by
or asserted against the Company in any way relating to or arising out of this
Agreement or the other Sale Documents or
54
the transactions contemplated hereby and thereby or in connection herewith or
any action taken or omitted by the Company under or in connection with any of
the foregoing (all such other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements being
herein called "Indemnified Liabilities") or (ii) which would not have been
imposed on, incurred by or asserted against the Company but for its having
acquired the Receivables hereunder; provided, however, that such indemnity shall
-------- -------
not be available to the extent that such Indemnified Liabilities result from the
gross negligence or wilful misconduct of the Company; and provided, further,
-------- -------
that such Seller shall have no obligation under this Section 9.03 to the Company
with respect to Indemnified Liabilities arising from (i) any action taken, or
omitted to be taken, by a Servicer that is not such Seller itself or an
Affiliate of such Seller, (ii) any action taken by the Trustee or the Company at
the direction of the Trustee in collecting from an Obligor or (iii) a default by
an Obligor with respect to any Purchased Receivable (other than arising out of
(x) any discharge, claim, offset or defense (other than discharge in bankruptcy
of the Obligor) of the Obligor to the payment of any Purchased Receivable
(including, without limitation, a defense based on such Purchased Receivable not
being a legal, valid and binding obligation of such Obligor enforceable against
it in accordance with its terms) or any other claim resulting from the sale of
the merchandise or services related to any such Purchased Receivable or the
furnishing or failure to furnish such merchandise or services, (y) a failure by
such Seller to perform its duties or obligations under this Agreement or (z) the
sale of any Purchased Receivable that is designated on the applicable Daily
Report to be an Eligible Receivable and is determined to have been at the date
of such sale an Ineligible Receivable or any Purchased Receivable which
thereafter becomes subject to a Dilution Adjustment). The agreements in this
Section 9.03 shall survive the collection of all Receivables, the termination of
this Agreement and the payment of all amounts payable hereunder.
55
SECTION 9.04. Successors and Assigns. This Agreement shall be
-----------------------
binding upon and inure to the benefit of the Sellers and the Company and their
respective successors (whether by merger, consolidation or otherwise) and
assigns. Each Seller agrees that it will not assign or transfer all or any
portion of its rights or obligations hereunder without the prior written consent
of the Company. Each Seller acknowledges that the Company shall assign all of
its rights hereunder to the Trustee. Each Seller consents to such assignment
and agrees that the Trustee, to the extent provided in the Pooling Agreement,
shall be entitled to enforce the terms of this Agreement and the rights
(including, without limitation, the right to grant or withhold any consent or
waiver) of the Company directly against such Seller, whether or not a Purchase
Termination Event or a Potential Purchase Termination Event has occurred. Each
Seller further agrees that, in respect of its obligations hereunder, it will act
at the direction of and in accordance with all requests and instructions from
the Trustee until all amounts due to the Investor Certificateholders are paid in
full. The Trustee, on behalf of the Investor Certificateholders, shall have the
rights of a third-party beneficiary under this Agreement.
SECTION 9.05. 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 CONFLICT OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT ISSUES OF
PERFECTION ARE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION.
SECTION 9.06. No Waiver; Cumulative Remedies. No failure to exercise
-------------------------------
and no delay in exercising, on the part of the Company, any right, remedy, power
or privilege hereunder, shall operate as a waiver thereof, nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and privileges herein
provided are cumulative and not exhaustive of any rights, remedies, powers and
privileges provided by law.
56
SECTION 9.07. Amendments and Waivers. Neither this Agreement nor any
-----------------------
terms hereof may be amended, supplemented or modified except in a writing signed
by the Company and each Seller. Any amendment, supplement or modification shall
not be effective until the Rating Agency Condition has been satisfied.
SECTION 9.08. Severability. Any provision of this Agreement which is
-------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render unenforce-
able such provision in any other jurisdiction.
SECTION 9.09. 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 follows in the case of the Company and each Seller, or to
such other address as may be hereafter notified by the respective parties
hereto:
The Company:
LFI Receivables Corporation
1300 National Highway
Thomasville, North Carolina 27360
Attention: Larry Milan and
Richard Kennett
Telecopy: (910) 476-4551
The Sellers:
to the addresses set
forth in Schedule 4
57
in each case, with a copy to
Trustee: The Chase Manhattan Bank, as Trustee
450 W. 33rd Street, 15th Floor
New York, New York 10011
Attention: Advanced Structured
Products Group
Telecopier: (212) 946-3240
SECTION 9.10. Counterparts. This Agreement may be executed by one or
-------------
more of the parties to this Agreement on any number of separate counterparts
(including by telecopy), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with the Company.
SECTION 9.11. Waivers of Jury Trial. EACH PARTY HERETO HEREBY
----------------------
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER SALE
DOCUMENTS.
(b) This Agreement shall constitute a security agreement under
applicable law.
SECTION 9.12. Jurisdiction; Consent to Service of Process. (a) EACH
--------------------------------------------
PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS
PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY NEW YORK STATE COURT OR
FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN NEW YORK CITY, AND ANY
APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE OTHER SALE DOCUMENTS OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR, TO THE EXTENT
PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE
58
PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING MAY
BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT
THE COMPANY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO
THIS AGREEMENT OR THE OTHER SALE DOCUMENTS AGAINST ANY SELLER OR ITS PROPERTIES
IN THE COURTS OF ANY JURISDICTION.
(b) EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES,
TO THE FULLEST EXTENT THEY MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER SALE
DOCUMENTS IN ANY NEW YORK STATE OR FEDERAL COURT. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE
OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY
SUCH COURT.
(c) EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF
PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 9.09. NOTHING IN THIS
AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW.
SECTION 9.13. Addition of Sellers. Subject to Section 3.05,
--------------------
Section 2.08(m) of the Pooling Agreement, any applicable provisions in any
Supplement, including Section 11.16 of the Series 1996-A Supplement dated as of
August 5, 1996, and the terms and conditions of this Section 9.13, from time to
time one or more additional wholly owned, direct or indirect, Subsidiaries of
Furnishings International Inc. may become Sellers hereunder and parties hereto.
If any such Subsidiary wishes to become an additional Seller, it shall submit a
request to such effect in writing to the Company. If the Company shall have
agreed to any such request, such Subsidiary shall become an additional Seller
hereunder and a party hereto on the
59
related Seller Addition Date upon satisfaction of the conditions set forth in
Section 3.05.
SECTION 9.14. Termination of Seller. (a) Any Seller (other than
----------------------
Furnishings International Inc.) shall be terminated as a Seller hereunder by the
Company on the date such Seller ceases to be a wholly owned, direct or indirect,
Subsidiary of Furnishings International Inc.; provided (i) that the aggregate
--------
outstanding Principal Amount of Purchased Receivables sold by all Sellers which
so cease to be wholly owned Subsidiaries at such time (together with the
aggregate outstanding Principal Amount of Purchased Receivables sold by all
Sellers which have been terminated pursuant to this Section 9.14 within the
preceding 90 days) shall not exceed 10% of the aggregate outstanding Principal
Amount of all Purchased Receivables and (ii) that no Purchase Termination Event
or Potential Purchase Termination Event has occurred and is continuing, or would
result as a result thereof. From and after the date any such Seller ceases to
be a wholly owned, direct or indirect, Subsidiary of Furnishings International
Inc., the Company shall cease buying Receivables and Related Property from such
Seller. Each such Seller shall be released as a Seller party hereto for all
purposes and shall cease to be a party hereto on the 90th day after the date on
which there are no amounts outstanding with respect to Purchased Receivables
previously sold by such Seller to the Company, whether such amounts have been
collected or written off in accordance with the Policies of such Seller. Prior
to such date, such Seller shall be obligated to perform its servicing and other
obligations hereunder and under the Transaction Documents to which it is a party
with respect to Purchased Receivables previously sold by such Seller to the
Company, including, without limitation, its obligation to direct the deposit of
Collections into the appropriate Lockbox.
(b) From time to time the Sellers, or the Master Servicer on behalf
of the Sellers, may request in writing that the Company designate one or more
Sellers as Sellers that shall cease to be parties to this Agreement; provided
--------
60
that no Purchase Termination Event or Potential Purchase Termination Event has
occurred and is continuing, or would result as a result thereof. Any such
request shall specify the minimum aggregate Principal Amount of outstanding
Purchased Receivables sold by the Sellers to be so designated and terminated by
the Company. Promptly after receipt of any such designation by the Company, the
Sellers shall either (i) elect not to terminate such designated Sellers or
(ii) select a date, which date shall not be later than 30 days after the date of
receipt of such designation, as the "Sale Termination Date" for such designated
Sellers. From and after such date, the Company shall cease buying Receivables
and Related Property from such Sellers. Each such Seller shall be released as a
Seller hereunder and a party hereto for all purposes and shall cease to be a
party hereto on the 90th day after the date on which there are no amounts
outstanding with respect to Purchased Receivables previously sold by such Seller
to the Company, whether such amounts have been collected or written off in
accordance with the Policies of such Seller. Prior to such date, such Seller
shall be obligated to perform its servicing and other obligations hereunder and
under the Transaction Documents to which it is a party with respect to Purchased
Receivables previously sold by such Seller to the Company, including, without
limitation, its obligation to direct the deposit of Collections into the
appropriate Lockbox.
(c) A terminated Seller shall have no obligation to repurchase any
Receivables previously sold by it to the Company, but will have continuing
obligations with respect to such Receivables (including making any Seller
Dilution Adjustment Payments and Seller Adjustment Payments) to the extent such
obligations arise hereunder.
SECTION 9.15. No Bankruptcy Petition. Each Seller, by entering into
-----------------------
this Agreement, and any present or future holder of the Seller Note, by its
acceptance thereof, covenants and agrees that, prior to the date which is one
year and one day after the date of termination of this Agreement pursuant to
Section 9.16, it will not institute
61
against, or join any other Person in instituting against, the Company any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any Applicable Insolvency Laws.
SECTION 9.16. Termination. This Agreement will terminate at such
------------
time as (a) the commitment of the Company to purchase Receivables from all the
Sellers hereunder shall have terminated and (b) all Receivables purchased here-
under have been collected, and the proceeds thereof turned over to the Company
and all other amounts owing to the Company hereunder shall have been paid in
full or, if Receivables sold hereunder have not been collected, such Receivables
have become Defaulted Receivables and the Company shall have completed its
collection efforts in respect thereto; provided, however, that the indemnities
-------- -------
of the Sellers to the Company set forth in this Agreement shall survive such
termination and provided, further that, to the extent any amounts remain due and
-------- -------
owing to the Company hereunder, the Company shall remain entitled to receive any
collections on Receivables sold hereunder which have become Defaulted
Receivables after it shall have completed its collection efforts in respect
thereof.
SECTION 9.17. Construction of Agreement. (a) Each Seller hereby
--------------------------
grants to the Company a security interest in all of such Seller's right, title
and interest in, to and under the Receivables originated by it and Related
Property now existing and hereafter created, all monies due or to become due and
all amounts received with respect thereto and all "proceeds" thereof (including
Recoveries), to secure all of such Seller's obligations hereunder.
(b) This Agreement shall constitute a security agreement under
applicable law.
62
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, all as of
the day and year first above written.
AMETEX FABRICS, INC.,
Seller and Servicer,
by
--------------------------
Name:
Title:
THE BERKLINE CORPORATION,
Seller and Servicer,
by
--------------------------
Name:
Title:
DREXEL HERITAGE
FURNISHINGS INC.,
Seller and Servicer,
by
--------------------------
Name:
Title:
63
DREXEL HERITAGE HOME
INSPIRATIONS, INC.,
Seller,
by
--------------------------
Name:
Title:
FURNISHINGS
INTERNATIONAL INC.,
Seller and Servicer,
by
--------------------------
Name:
Title:
HENREDON FURNITURE
INDUSTRIES, INC.,
Seller and Servicer,
by
--------------------------
Name:
Title:
64
LA BARGE, INC.,
Seller and Servicer,
by
--------------------------
Name:
Title:
LEXINGTON FURNITURE
INDUSTRIES, INC.,
Seller and Servicer,
by
--------------------------
Name:
Title:
MAITLAND-SMITH, INC.,
Seller and Servicer,
by
--------------------------
Name:
Title:
ROBERT ALLEN FABRICS, INC.,
Seller and Servicer,
by
--------------------------
Name:
Title:
65
UNIVERSAL FURNITURE
INDUSTRIES, INC.,
Seller and Servicer,
by
--------------------------
Name:
Title:
LFI RECEIVABLES CORPORATION,
by
--------------------------
Name:
Title:
Exhibit A to the
Receivables Sale Agreement
--------------------------
[FORM OF
SELLER NOTE]
New York, New York
August 5, 1996
LFI RECEIVABLES CORPORATION, a Delaware corporation (the "Company"),
hereby promises to pay to the order of the Sellers listed on Schedule 1 to the
Receivables Sale Agreement described below the principal amount of this Seller
Note, determined as described below, together with interest thereon at a rate
per annum equal to One-Month LIBOR plus 2.50% (or, if less, the "Applicable
Percentage" with respect to "Eurodollar Loans" (as each such term is defined in
the Credit Agreement)) in lawful money of the United States of America.
Capitalized terms used herein but not defined herein shall have the meanings
assigned to such terms in the Receivables Sale Agreement dated as of August 5,
1996, among the Company, the Sellers named therein and the Servicers named
therein (as amended, supplemented or otherwise modified from time to time in
accordance with its terms, the "Receivables Sale Agreement") and in the Pooling
Agreement, dated as of August 5, 1996, among the Company, LFI Servicing
Corporation, as Master Servicer, and The Chase Manhattan Bank, a New York
banking corporation, as Trustee (as amended, supplemented or otherwise modified
from time to time in accordance with its terms, the "Pooling Agreement"). This
Seller Note is the Seller Note referred to in the Receivables Sale Agreement and
is subject to the terms and conditions thereof.
1. Principal Amount. The aggregate principal amount of this Seller
-----------------
Note at any time shall be calculated in accordance with Section 8.01 of the
Receivables Sale Agreement and shall be recorded by the Master Servicer (the
authority to so record such amounts being hereby granted to
2
the Master Servicer) on the schedule annexed to and constituting a part of this
Seller Note.
2. Payments of Principal and Interest. (a) Principal on this Seller
-----------------------------------
Note may be prepaid at any time. Principal not prepaid shall be due and payable
on the Trust Termination Date (as defined in the Pooling Agreement).
(b) Payments of interest on this Seller Note shall be paid on each
Distribution Date (with respect to interest accrued and not paid as of the
preceding Distribution Date (or, in the case of the first Distribution Date, as
of the date on which this Seller Note is issued)) and on the Trust Termination
Date by depositing such payment in such account of the Sellers as the Sellers
may designate in writing; provided, however, that accrued interest on this
-------- -------
Seller Note which is not so paid may (to the maximum extent permitted by law) be
added to the principal amount of this Seller Note as indicated on the schedule
annexed to and constituting a part of this Seller Note. Notwithstanding the
foregoing, no payments of interest or principal may be made under this Seller
Note at the times and to the extent prohibited under the Subordination
Provisions and Certain Termination Events described in Sections 3 and 6 below.
3. Subordination Provisions. The Company covenants and agrees, and
-------------------------
the Sellers, by their acceptance of this Seller Note, likewise covenant and
agree, that the payment of all obligations of the Company to the Sellers under
this Seller Note from or with the proceeds (such proceeds being the "Proceeds")
of Receivables (as defined in the Pooling Agreement), Related Property (as
defined in the Pooling Agreement) or the LHL Demand Note (as defined in the
Pooling Agreement) (and any extensions, renewals, financing, refundings and
replacements of all or any part of such obligations) (the "Seller Subordinated
Debt") are hereby expressly subordinated in right of payment to the payment and
performance of the obligations of the Company to the Trustee for the benefit of
the Certificateholders (as
3
defined in the Pooling Agreement) howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent, now or hereafter existing,
or due or to become due (the "Senior Obligations") to the extent and in the
manner set forth in this paragraph including each of the following subparts:
(a) Insolvency Events; Priority of Senior Obligations; Payments Made
----------------------------------------------------------------
Directly to the Trustee. In the event of any bankruptcy, dissolution,
------------------------
winding up, liquidation, readjustment, reorganization or other similar
event relating to the Company, whether voluntary or involuntary, partial or
complete, and whether in bankruptcy, insolvency, receivership or other
similar proceedings, or upon an assignment for the benefit of creditors, or
any other marshalling of the assets and liabilities of the Company (each an
"Insolvency Event") or any sale of all or substantially all the assets of
the Company (except pursuant to the Pooling Agreement and any Supplement
thereto),
(i) the Senior Obligations shall first be paid and performed in
full and in cash before the Sellers shall be entitled to receive and
to retain any payment or distribution from or with the Proceeds in
respect of the Seller Subordinated Debt, whether of principal,
interest or otherwise; and
(ii) any payment or distribution from or with the Proceeds of any
kind (including cash or property arising from Proceeds which may be
payable or deliverable by reason of the payment of any other
indebtedness of the Company being subordinated to the payment of the
Seller Subordinated Debt) in respect of the Seller Subordinated Debt
that otherwise would be payable or deliverable with respect to the
Seller Subordinated Debt directly or indirectly, by set-off or in any
other manner to the Sellers, shall
4
be paid or delivered by the Person making such payment or delivery
(whether a trustee in bankruptcy, a receiver, custodian, liquidating
trustee or otherwise) directly to the Trustee on behalf of the
Certificateholders for application to (in the case of cash) or as
collateral for (in the case of noncash property or securities) the
payment of the Senior Obligations until the Senior Obligations shall
have been paid in full in cash.
(b) Payments Received by Sellers. In the event that any Seller
-----------------------------
receives any payment or other distribution of any kind or character arising
from Proceeds from the Company or from any other source whatsoever in
respect of the Seller Subordinated Debt after the commencement of an
Insolvency Event, such payment or other distribution shall be deemed to be
property of the Certificateholders and shall be received and held by such
Seller in trust for the Trustee on behalf of the Certificateholders and
shall be turned over by such Seller to the Trustee for the benefit of the
Certificateholders forthwith, until all Senior Obligations have been paid
and performed in full and in cash.
(c) Application of Payments. All payments and distributions arising
------------------------
from Proceeds received by the Trustee in respect of the Seller Subordinated
Debt, to the extent received in or converted into cash, may be applied by
the Trustee for the benefit of the Certificateholders (i) first to the
payment of any and all reasonable expenses (including reasonable attorneys'
fees and legal expenses) paid or incurred by the Trustee or any
Certificateholder in enforcing these Subordination Provisions, or in
endeavoring to collect or realize upon the Seller Subordinated Debt, and
(ii) any balance remaining therefrom shall be applied by the Trustee toward
the payment of the Senior Obligations in a manner determined by the Trustee
to be in accordance with the Pooling Agreement.
5
(d) Sellers' Rights of Subrogation. Each Seller agrees that no
-------------------------------
payment or distribution to Certificateholders pursuant to these
Subordination Provisions shall entitle any Seller to exercise any right of
subrogation in respect thereof until the Senior Obligations shall have been
paid in full in cash. Each Seller agrees that these Subordination
Provisions herein shall not be affected by any action, or failure to act,
by any holder of Senior Obligations which results, or may result, in
affecting, impairing or extinguishing any right of reimbursement or
subrogation or other right or remedy of any Seller.
(e) Company's Obligations Absolute. The provisions of this paragraph
-------------------------------
are intended solely for the purpose of defining the relative rights with
respect to Proceeds of the Sellers, on the one hand, and the
Certificateholders, on the other hand. Nothing contained in these
provisions or elsewhere in this Seller Note is intended to or shall impair,
as between the Company, its creditors (other than the Certificateholders)
and the Sellers, the Company's obligation, which is unconditional and
absolute, to pay the Seller Subordinated Debt as and when the same shall
become due and payable in accordance with the terms hereof and of the
Receivables Sale Agreement or to affect the relative rights of the Sellers
and creditors of the Company (other than the Certificateholders); provided
--------
that any payments made by the Company pursuant to this subsection shall be
made solely from funds available to the Company which are not otherwise
needed to be applied to the payment of any amounts pursuant to any Pooling
and Servicing Agreements, shall be non-recourse other than with respect to
proceeds in excess of the proceeds to make such payment, and shall not
constitute a claim against the Company to the extent that insufficient
proceeds exist to make such payment.
(f) Avoided Payments. If, at any time, any payment (in whole or in
-----------------
part) made with respect to any
6
Senior Obligations is rescinded or must be restored or returned by a
Certificateholder or the Trustee on behalf of the Certificateholders, the
provisions of this paragraph shall continue to be effective or shall be
reinstated, as the case may be, as though such payment had not been made.
(g) Subordination Not Affected by Certain Actions of
------------------------------------------------
Certificateholders or the Trustee. As between the Sellers, on the one
----------------------------------
hand, and the Certificateholders and the Trustee, on the other hand, each
of the Certificateholders or the Trustee may, from time to time, at its
sole discretion, without notice to the Sellers, and without waiving any of
its rights under these Subordination Provisions, take any or all of the
following actions: (i) retain or obtain an interest in any property to
secure any of the Senior Obligations; (ii) extend or renew for one or more
periods (whether or not longer than the original period), alter, increase
or exchange any of the Senior Obligations, or release or compromise any
obligation of any nature with respect to any of the Senior Obligations;
(iii) amend, supplement, amend and restate, or otherwise modify any
Transaction Document; and (iv) release its security interest in, or
surrender, release or permit any substitution or exchange for all or any
part of any rights or property securing any of the Senior Obligations.
(h) Waiver of Notice. By its acceptance hereof, each Seller hereby
-----------------
waives: (i) notice of acceptance of the provisions of this paragraph by any
of the Certificateholders or the Trustee; (ii) notice of the existence,
creation, non-payment or non-performance of all or any of the Senior
Obligations; and (iii) all diligence in enforcement, collection or
protection of, or realization upon, the Senior Obligations or any security
therefor.
7
4. Restrictions on Assignment. Neither this Seller Note, nor any
---------------------------
right of the Sellers to receive payments hereunder, shall be assigned,
transferred, exchanged, pledged, hypothecated, participated or otherwise
conveyed.
5. No Bankruptcy Petition. Each Seller covenants and agrees that,
-----------------------
prior to the date which is one year and one day after the date of termination of
the Receivables Sale Agreement pursuant to Section 9.16 thereof, it will 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.
6. Certain Termination Events. During the continuance of any Early
---------------------------
Amortization Event:
(a) the Company shall cease making any payments to the Sellers under
this Seller Note;
(b) the Trustee (on behalf of the Certificateholders) may demand, sue
for, collect and receive every payment or distribution of any kind made in
respect of the Seller Subordinated Debt and file claims and proofs of claim
and take such other action (including enforcing any security interest or
other lien securing payment of the Seller Subordinated Debt) as the Trustee
(on behalf of the Certificateholders) may deem necessary for the exercise
or enforcement of any of the rights or interests of Certificateholders;
provided that in the event the Trustee takes such action, it shall apply
--------
all proceeds first to the payment of costs under this Seller Note, then to
the payment of the Senior Obligations and any surplus proceeds remaining
thereafter to be paid over to whosoever may be lawfully entitled thereto;
and
8
(c) each Seller shall promptly take such action as the Trustee (on
behalf of the Certificateholders) may request (i) to file appropriate
claims or proofs of claim in respect of the Seller Subordinated Debt;
(ii) to execute and deliver to the Trustee (on behalf of the
Certificateholders) such powers of attorney, assignments, or other
instruments as the Trustee may request in order to enable it to enforce any
and all claims with respect to, and any security interests and other liens
securing payment of, the Seller Subordinated Debt, and (iii) to collect and
receive any and all payments or distributions which may be payable or
deliverable upon or with respect to the Seller Subordinated Debt for
account of the Trustee (on behalf of the Certificateholders).
THIS SELLER NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ANY CONFLICT OF LAW
PRINCIPLES.
LFI RECEIVABLES CORPORATION,
by
____________________________
Name:
Title:
Schedule 1 to
Seller Note
-----------
Subordinated Loans and Payments of Principal
--------------------------------------------
Amount of Unpaid
Amount of Principal Principal Notation
Date Loans Repaid Balance Made By
---------- ---------- ---------- ---------- ----------
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
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__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
2
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
Exhibit B to the
Receivables Sale Agreement
--------------------------
[FORM OF ADDITIONAL SELLER/SERVICER SUPPLEMENT]
SUPPLEMENT, dated [ ], to (i) the Receivables Sale
Agreement, dated as of August 5, 1996, (the "Receivables Sale Agreement"), among
LFI Receivables Corporation, the Sellers named therein and the Servicers named
therein and (ii) the Servicing Agreement, dated as of August 5, 1996 (the
"Servicing Agreement"), among LFI Receivables Corporation, LFI Servicing
Corporation, as Master Servicer, the Servicers party thereto and The Chase
Manhattan Bank, as Trustee.
W I T N E S S E T H:
WHEREAS, the Receivables Sale Agreement provides that any wholly
owned, direct or indirect Subsidiary of Furnishings International Inc., although
not originally a Seller thereunder, may become a Seller under the Receivables
Sale Agreement upon the satisfaction of each of the conditions precedent set
forth in Sections 3.05 and 9.13 of the Receivables Sale Agreement,
Section 2.08(m) of the Pooling Agreement and any applicable provisions in any
supplement, including Section 11.16 of the Series 1996-A Supplement dated as of
August 5, 1996;
WHEREAS, the Servicing Agreement provides that any wholly owned,
direct or indirect, Subsidiary of Furnishings International Inc., although not
originally a Servicer thereunder, may become a Servicer under the Servicing
Agreement upon, (i) the delivery to the Company of a supplement in substantially
the form of this Supplement and (ii) the satisfaction of each of the conditions
precedent set forth in Sections 3.05 of the Receivables Sale Agreement; and
WHEREAS, the undersigned was not an original Seller under the
Receivables Sale Agreement and the Seller Note or an original Servicer under the
Servicing Agreement
2
but now desires to become a Seller and a Servicer, respectively, thereunder.
3
NOW, THEREFORE, the undersigned hereby agrees as follows:
The undersigned agrees to be bound by all of the provisions of each of
the Receivables Sale Agreement and the Servicing Agreement applicable to a
Seller and a Servicer, respectively, thereunder and agrees that it shall, on the
date this Supplement is accepted by the Company and the Trustee, on behalf of
the Certificateholders, become (a) in the case of the Receivables Sale
Agreement, a Seller and (b) in the case of the Servicing Agreement, a Servicer,
for all purposes of the Receivables Sale Agreement and the Servicing Agreement,
respectively, to the same extent as if originally a party thereto.
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be
executed and delivered by a duly authorized officer on the date first above
written.
[Insert name of Seller/Servicer]
by
________________________________
Title:
Accepted as of the date
first above written:
LFI RECEIVABLES COMPANY
by
__________________________
Title:
4
Acknowledged as of the date
first above written:
THE CHASE MANHATTAN BANK, as Trustee, on
behalf of the Certificateholders,
by
__________________________
Title:
Schedule 1 to the
Receivables Sale Agreement
--------------------------
Sellers and Servicers 1/
--------------------- -
Ametex Fabrics, Inc.
The Berkline Corporation
Drexel Heritage Furnishings Inc.
Drexel Heritage Home Inspirations, Inc.
Furnishings International Inc.
Henredon Furniture Industries, Inc.
LaBarge, Inc.
Lexington Furniture Industries, Inc.
Maitland-Smith, Inc.
Robert Allen Fabrics, Inc.
Universal Furniture Industries, Inc.
--------------------
1/ Each Seller will service the Receivables originated
-
by it, except that Drexel Heritage Furnishings Inc. will
service the Receivables originated by Drexel Heritage Home
Inspirations, Inc. and Lineage Home Furnishings, Inc. (which
will be merged into Furnishings International Inc. upon
closing).
Schedule 2 to the
Receivables Sale Agreement
--------------------------
Receivables
-----------
Delivered or transmitted via computer tape, diskette or data transmission
pursuant to Section 3.01(iv).
Schedule 3 to the
Receivables Sale Agreement
--------------------------
Lockboxes
---------
Schedule 4 to the
Receivables Sale Agreement
--------------------------
Jurisdiction of Location of Chief Office Where
Seller Incorporation Executive Office Records are Kept
------ --------------- ----------------- ----------------
Ametex Fabrics, Delaware 120 Forbes Blvd. Same
Inc. Mansfield, MA
02048
The Berkline Delaware One Berkline Same
Corporation Drive
P.O. Box 6003
Morristown, TN
37815
Drexel Heritage New York 101 North Main Same
Furnishings Street
Inc. Drexel, NC 28619
Drexel Heritage North Carolina 101 North Main Same
Home Street
Inspirations, Drexel, NC 28619
Inc.
Furnishings Delaware 1300 National Same 1/
-
International Highway
Inc. Thomasville, NC
27360
Henredon North Carolina 400 Henredon Road Same
Furniture Morganton, NC
Industries, 28655
Inc.
LaBarge, Inc. Michigan 300 East 40th Same
Street
P.O. Box 1769
Holland, MI
49422-1769
Lexington North Carolina 411 S. Salisbury Same
Furniture Lexington, NC
Industries, 27292
Inc.
--------------------
1/ The same, except that i) the Lineage Home Furnishings
-
division's records are kept at 101 North Main Street, Drexel, NC 28619
and (ii) the Contract Furnishings division's records are kept at 1515
Green Drive, Thomasville, NC 27360.
2
Jurisdiction of Location of Chief Office Where
Seller Incorporation Executive Office Records are Kept
------ --------------- ----------------- ----------------
Maitland-Smith, North Carolina 4000 Lineage Same
Inc. Court
Suite 201
High Point, NC
27265
Robert Allen Delaware 55 Cabot Blvd. Same
Fabrics, Inc. Mansfield, MA
02048
Universal Delaware 2622 Uwharrie Same
Furniture Road
Industries, High Point, NC
Inc. 27263
Schedule 5 to the
Receivables Sale Agreement
--------------------------
Names
-----
Trade, "Doing Business As"
Seller or Assumed Name[s]
------ -------------------------
Ametex Fabrics, Inc. Ametex Fabrics, Inc. Contract
Division
The Berkline Corporation Motionworks
Drexel Heritage Furnishings Inc. D-H Retail Space, Inc.
Drexel
Frederick Edward
Drexel Heritage Advertising Inc.
Heritage
Lineage
Drexel Heritage Home None
Inspirations, Inc.
Furnishings International Inc. Lineage Home Furnishings, Inc.
Masco Home
Furnishings, Inc.
Henredon Furniture Industries, Inc. Henredon
Henredon Acquisition
Henredon Furniture
Henredon/Ralph Lauren
Henredon Transportation, Inc.
Henredon Upholstery
N.C. Schoonbeck
La Barge, Inc. Entree
La Barge Mirrors, Inc.
La Barge/Marbro Factory
Outlet Store
LMI Advertising
Marbro Lamp
Lexington Furniture Industries, Inc. Henry Link
Maitland-Smith, Inc. None
2
Trade, "Doing Business As"
Seller or Assumed Name[s]
------ -------------------------
Robert Allen Fabrics, Inc. American Textiles
Robert Allen Canada, Inc.
Robert Allen of New York
Robert Allen Fabrics, Inc. Contract
Division
Robert Allen Fabrics of Cleveland
Robert Allen Fabrics of Houston
Universal Furniture Industries, Inc. Bench Craft
Blue Mountain Trucking
Carrington Hall
Harris Scott
Norfolk Veneer Mills
Simply Together
Universal Bedroom Furniture
Universal Bedroom Furniture Ltd.
Universal Dining Room Furniture,
Ltd.
Universal Flooring Ltd.
Universal Occasional Furniture
Limited
Universal Upholstery
Woodmaster
Schedule 6 to the
Receivables Sale Agreement
--------------------------
Discounted Percentage
---------------------
All terms defined or referenced in the Receivables Sale Agreement, the
Pooling Agreement or a Supplement and not otherwise defined or referenced herein
are used herein as therein defined or referenced.
The Discounted Percentage applicable to the Receivables purchased on any date
from any Seller shall equal (a) until the date which is 90 days after the
initial Effective Date, 97.96% and (b) thereafter, the percentage obtained from
the following formula:
100% - (A + B + C + D)
all determined by the Company as of the related Payment Date,
Where
A = Adjusted Loss Reserve Percentage, which as of such Payment Date will equal
the ratio obtained by dividing (a) Charged-Off Receivables (net of
recoveries in respect of Charged-Off Receivables) with respect to such
Seller during the six-fiscal-month period immediately preceding the
Settlement Report Date most recently preceding such Payment Date by (b) two
times the aggregate amount of Collections during the three-fiscal-month
period immediately preceding the Settlement Report Date most recent to such
Payment Date with respect to Receivables originated by such Seller.
B = Adjusted Carrying Cost Reserve Percentage, which as of such Payment Date
will equal the amount obtained by dividing (a) the product of (i) 1.5,
(ii) Days Sales Outstanding and (iii) the ABR plus 2% by (b) 365.
C = The Servicing Fee Percentage divided by 360.
----------
2
D = Processing Expense Reserve Percentage, which will equal 1/2% and reflects
the cost of the Company's overhead, including costs of processing the
purchase of Receivables and other normal operating costs and a reasonable
profit margin.
None of the elements of the above-referenced formula, in respect of any purchase
of Receivables, will be adjusted following the related Payment Date.
With respect to each calculation set forth above with respect to a Settlement
Report Date, such calculation as calculated on such Settlement Report Date and
included in the applicable Monthly Settlement Statement shall remain in effect
from and including the related Settlement Report Date to but excluding the
following Settlement Report Date.