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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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For the Fiscal Year Ended December 31, 1996 Commission File Number: 333-11905
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LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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Delaware 56-1977928
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(State of Incorporation) (I.R.S. Employer Identification No.)
1300 National Highway, Thomasville, NC 27360
(Address of Principal Executive Offices) (Zip Code)
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Registrant's telephone number, including area code: (910) 476-4777
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
The registrant is a privately held corporation. As such, there is no practicable
method to determine the aggregate market value of the voting stock held by
non-affiliates of the registrant.
Number of shares outstanding of the registrant's Common Stock at March 1,
1997:
100 shares of Common Stock, par value $.01 per share
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TABLE OF CONTENTS
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ITEM PAGE NO.
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PART I
1. Business......................................................................................... 3
2. Properties....................................................................................... 13
3. Legal Proceedings................................................................................ 13
4. Submission of Matters to a Vote of Security Holders.............................................. 14
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters............................ 15
6. Selected Financial Data.......................................................................... 16
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................................................ 17
8. Financial Statements............................................................................. 22
9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure............................................................................. 48
PART III
10. Directors and Executive Officers of the Registrant............................................... 49
11. Executive Compensation........................................................................... 49
12. Security Ownership of Certain Beneficial Owners and Management................................... 49
13. Certain Relationships and Related Transactions................................................... 49
PART IV
14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K.................................. 50
15. Signatures....................................................................................... 52
FINANCIAL STATEMENT SCHEDULE
LIFESTYLE FURNISHINGS INTERNATIONAL LTD. Financial Statement Schedule....................................... F-1
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PART I
ITEM 1. BUSINESS
GENERAL
LIFESTYLE FURNISHINGS INTERNATIONAL LTD. (the "Company") is the largest
manufacturer and marketer of home furnishing products. The Company markets a
comprehensive selection of quality products under well-known brand names through
an extensive worldwide distribution network. The Company offers products in
price categories ranging from "promotional" to "premium," with a primary
concentration in the "good," "better" and "best" categories. The Company's
products enjoy an international reputation for quality, craftsmanship, style and
value.
FINE FURNITURE. The Company designs, manufactures and markets a full range
of quality wood and upholstered furniture to furnish any room of a home in
virtually any style, under such well-known brand names as
Henredon-Registered Trademark-, Drexel Heritage-Registered Trademark-,
Lexington-Registered Trademark-, Universal-Registered Trademark-,
Berkline-Registered Trademark- and BenchCraft-Registered Trademark-, and a wide
range of furniture accessories under the Maitland-Smith-TM- and La
Barge-Registered Trademark- brand names.
DECORATIVE HOME FURNISHING FABRICS. The Company designs, markets and
distributes over 25,000 decorative home furnishing fabrics, such as fabrics for
upholstery and draperies, under such well-known brand names as Robert Allen-TM-,
Sunbury-TM- and Beacon Hill-Registered Trademark-.
The Company was incorporated under the laws of Delaware in May 1996 for the
purpose of acquiring the Home Furnishings Group (the "Predecessor") of Masco
Corporation ("Masco"). FURNISHINGS INTERNATIONAL INC., a Delaware corporation
("Holdings"), subscribed for 100 shares of the common stock, par value $.01 per
share, of the Company and is the Company's sole stockholder. On August 5, 1996,
Holdings acquired the Predecessor from Masco pursuant to an acquisition
agreement (the "Acquisition Agreement") for a purchase price of approximately
$1.1 billion and contributed substantially all of the businesses acquired to the
Company as common equity. The purchase price was financed by: (1) senior bank
facilities ($325.0 million); (2) $200.0 million principal amount 10 7/8 percent
senior subordinated notes due 2006 (the "Notes"); (3) equity contribution
($421.0 million); and (4) proceeds from sale of accounts receivable ($155.0
million). Prior to the closing of such transactions on August 5, 1996, the
Company conducted no business. References to the Company for periods prior to
August 5, 1996 refer, unless the context otherwise requires, to the Predecessor.
PRODUCTS
The Company is the largest manufacturer and marketer of home furnishing
products. It believes it offers the most comprehensive product line in the home
furnishings industry, including (i) bedroom, dining room, living room, family
room and home office casegoods; (ii) stationary upholstered products such as
sofas, love seats, sectionals and chairs; (iii) upholstered recliners, motion
furniture and sleep sofas; (iv) occasional furniture such as home entertainment
centers, lamps, chairs, tables, mirrors and other accent items and (v)
decorative home furnishing fabrics.
FINE FURNITURE
The product category "Fine Furniture" includes wood and upholstered
residential furniture (other than "ready-to-assemble" products), as well as
occasional tables, decorative mirrors, lighting and other related furnishing
accessories. The Company designs, manufactures and markets a full range of
quality wood and upholstered furniture to furnish any room of a home in
virtually any style, under such well-known brand names as
Henredon-Registered Trademark-, Drexel Heritage-Registered Trademark-,
Lexington-Registered Trademark-, Universal-Registered Trademark-,
Berkline-Registered Trademark- and BenchCraft-Registered Trademark-, and a wide
range of furniture accessories under the Maitland-Smith-TM- and La
Barge-Registered Trademark- brand names. The Company offers these products
across all major price categories, from "promotional" to "premium," and in every
major style category, including American Traditional, Country, Eighteenth
Century, European Country, European Traditional, Casual, Contemporary, Home
Office, Youth and Oriental. By offering such a broad product line, the Company
can supply up to 75% of the product demands of most furniture
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retailers, and more easily satisfy retailers who increasingly prefer to buy from
a smaller number of larger suppliers.
The following table illustrates the product and price category coverage of
the Company's fine furniture brands. The residential furniture industry
generally classifies its products by several price categories ranging from
"promotional" to "premium." Products in successively higher price categories are
made using more expensive raw materials, have higher quality finishes, and often
involve higher labor costs.
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PRICE
CATEGORY PRODUCT CATEGORY
STATIONARY MOTION/
CASEGOODS UPHOLSTERY RECLINER OCCASIONAL
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PREMIUM Henredon-RTM- Beacon Hill-RTM- Henredon-RTM-
Maitland-Smith- Henredon-RTM- La Barge-RTM-
TM- Maitland-Smith-
TM-
BEST Drexel Heritage- Beacon Hill-RTM- Drexel Heritage- Drexel Heritage-
RTM- Drexel Heritage- RTM- RTM-
Henredon-RTM- RTM- Henredon-RTM-
Maitland-Smith- Henredon-RTM- La Barge-RTM-
TM- Maitland-Smith-
TM-
BETTER Drexel Heritage- BenchCraft-RTM- BenchCraft-RTM- Drexel Heritage-
RTM- Drexel Heritage- Berkline-RTM- RTM-
Lexington-RTM- RTM- Drexel Heritage- Lexington-RTM-
Universal-RTM- Lexington-RTM- RTM-
Universal-RTM-
GOOD Lexington-RTM- BenchCraft-RTM- BenchCraft-RTM- Universal-RTM-
Universal-RTM- Universal-RTM- Berkline-RTM-
PROMOTIONAL Universal-RTM- BenchCraft-RTM- BenchCraft-RTM- Universal-RTM-
Berkline-RTM-
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Shaded area indicates product category does not exist.
HENREDON-REGISTERED TRADEMARK-
Henredon designs and manufactures wood, upholstered and occasional furniture
for the bedroom, dining room, living room, family room and home office. Its
products are in the "best" and "premium" price categories and are aimed at the
"replacement" market, where customers typically trade up in price and quality
and demand superior design, materials and craftsmanship. Product design and
development represent an important element of Henredon's success, and Henredon
is considered to be one of the premier names in design for furniture in the
high-end price categories. Henredon currently sells approximately 19
collections, and designs and develops approximately four new product collections
each year. Henredon's products cover all major style categories within the
high-end niche, including Eighteenth Century, European Traditional,
Transitional, Contemporary, Sophisticated Country and Casual. Since 1993,
Henredon has manufactured and marketed products for the Ralph Lauren Furniture
Collection-TM- under a special licensing relationship with the Ralph Lauren
organization. Henredon believes this line of high-end wood and upholstered
furniture is an excellent complement to its other product lines.
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DREXEL HERITAGE-REGISTERED TRADEMARK-
Drexel Heritage designs and manufactures wood, upholstered, motion and
occasional furniture for the bedroom, dining room, living room, family room and
home office in the "better" and "best" price categories. It currently produces
approximately 26 collections of wood and upholstered furniture. Approximately
four to six new collections are offered each year. Drexel Heritage's product
styles include American Traditional, Country, Eighteenth Century, European
Traditional, Contemporary and Transitional. Drexel Heritage also produces
furniture for sale to the hospitality and government markets.
LEXINGTON-REGISTERED TRADEMARK-
Lexington designs and manufactures wood, upholstered and occasional
furniture for the bedroom, dining room, living room, family room and home office
in the "good" and "better" price categories. Lexington currently produces over
40 collections of furniture and designs and develops four to six new collections
each year. The Company believes that Lexington's merchandising and design teams,
which have received several industry awards for product design and marketing in
recent years, are among the industry's best. Product design and development
represent an integral part of Lexington's success. Lexington pioneered
"Lifestyle" and designer collections, and its collections currently include the
popular The World of Bob Timberlake-TM-, The Palmer Home Collection-TM-, Lynn
Hollyn at Home-TM-, Weekend Retreat-TM-, American Country West-TM-, Old Salem
Collection-TM-, DeCristofaro-TM-, Vestiges-TM- and Pacific Overtures-TM-. These
collections have become an important part of Lexington's offerings. Product
styles include Traditional, Eighteenth Century, Country and Casual.
UNIVERSAL-REGISTERED TRADEMARK-
Universal's products include wood, upholstered and occasional furniture in
the "promotional," "good" and "better" price categories. Universal products are
manufactured in part in Asia, where the Company is the largest United States
residential furniture manufacturer, with access to a highly-skilled (in such
areas as intricate veneering and hand carving), low-cost work force, and to
scarce raw materials such as Chinese oak, wicker, rattan and certain exotic
woods. Universal currently sells approximately 20 collections of furniture,
including styles such as Eighteenth Century, Traditional, Transitional, Oriental
and Country, and introduces four to six new collections a year. Universal's
Alexander Julian Home Colours-TM- and American Generations-TM- collections are
among the industry's best sellers.
BERKLINE-REGISTERED TRADEMARK-
Berkline designs and manufactures a wide range of recliners, motion
furniture and sleep sofas, primarily in the "good" and "better" price
categories. The Berkline-Registered Trademark- brand name is well known in the
rapidly growing market for upholstered modular and motion furniture and free
standing recliners. Berkline offers a wide range of styles, fabrics and leathers
for these products, as well as popular innovative features such as hidden cup
holders and built-in tables.
BENCHCRAFT-REGISTERED TRADEMARK-
BenchCraft designs and manufactures a comprehensive line of upholstered
furniture, including stationary, motion, leather, wicker and rattan.
BenchCraft's products are in the "promotional," "good," and "better" price
categories and are marketed as fashionable, affordable furniture for "casual
living."
MAITLAND-SMITH-TM-
Maitland-Smith designs and manufactures an innovative line of "best" and
"premium" hand-crafted, antique-inspired furniture, accessories and lighting,
utilizing a wide range of unique materials, including leather, fancy faced
veneer, stone and hand-painted metal.
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LA BARGE-REGISTERED TRADEMARK-
La Barge-Registered Trademark- designs and sells decorative mirrors, metal
and glass occasional tables, decorative lighting and related accessories under
three brand names: La Barge-Registered Trademark-, Marbro-Registered Trademark-
and Entree-TM-, in the "best" and "premium" price categories. La
Barge-Registered Trademark- designs its products, and contracts their
manufacture with established suppliers around the world who it believes can
produce high quality, specialty products with decorative style.
BEACON HILL-REGISTERED TRADEMARK-
The Company's Beacon Hill Showrooms sell primarily "best" and "premium" fine
furniture products manufactured by the Company and third parties, including
certain products under the Beacon Hill-Registered Trademark- brand name,
exclusively to interior design professionals and their clients.
DECORATIVE HOME FURNISHING FABRICS
The Company designs, markets and distributes over 25,000 decorative home
furnishing fabrics, such as fabrics for upholstery and draperies, under such
well-known brand names as Robert Allen-TM-, Sunbury-TM- and Beacon
Hill-Registered Trademark-. The Company offers decorative home furnishing
fabrics (including trim and finished products) in each of the "good," "better,"
"best" and "premium" price categories. The following table illustrates the price
category coverage of the Company's decorative home furnishing fabric brands:
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PRICE CATEGORY BRAND
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Premium Beacon Hill-Registered Trademark-
Ramm, Son & Crocker-TM-
Best Beacon Hill-Registered Trademark-
Ramm, Son & Crocker-TM-
Sunbury-TM-
Better Ametex-TM-
Robert Allen Total Home-TM-
Sunbury-TM-
Good Ametex-TM-
American Town & Country-TM-
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ROBERT ALLEN-TM-
Robert Allen's products include over 22,000 different SKU's of upholstery
fabrics, drapery fabrics, trim and finished products (bedspreads, comforters,
pillows and similar products), sourced from a variety of independent fabric
mills and manufacturers located around the world. Robert Allen offers products
in all price categories. Its American Town & Country-TM- fabrics, which are in
the "good" price category, are targeted at smaller upholstery and drapery shops.
Its Robert Allen Total Home-TM- fabrics, which are in the "better" price
category, are targeted at designer and specialty stores. Its Beacon
Hill-Registered Trademark- fabrics, which are in the "best" and "premium" price
categories, are targeted at upper-end interior designers.
AMETEX-TM-
Ametex's products include a broad line of printed and woven fabrics in the
"good" and "better" price categories. Ametex converts fabrics from both its own
designs and those licensed from third parties, including designs based on the
Vatican Museum collection. Ametex also produces, to order, finished fabric
products such as bedding and draperies. Ametex U.K. produces a line of "better"
printed and woven
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fabrics, which include many designs that are in the domestic Ametex line, as
well as designs that are made specifically for the European market.
SUNBURY-TM-
Sunbury designs and weaves a line of proprietary decorative jacquard
upholstery fabrics for the furniture industry in the "better" and "best" price
categories. Fabrics are woven in traditional, transitional, contemporary,
sophisticated country and custom designs. Sunbury strives to produce fabrics
that allow furniture manufacturers to differentiate their products from those of
their competitors, rather than commodity fabric products. Most of Sunbury's
woven designs are protected by exclusive copyright, and all of its products are
woven to order.
RAMM, SON & CROCKER-TM-
Ramm, Son & Crocker produces traditional furnishing fabrics in the "best"
and "premium" price categories. Its product line consists primarily of
decorative printed fabrics and, to a lesser extent, woven fabrics and wallpaper.
It owns a unique archive of approximately 17,000 documented 18th and 19th
Century designs, and also has exclusive United States distribution rights to
such major brands as Liberty of London, Zoffany, Pepe Penalver, Haas and Blue
Home.
DISTRIBUTION
The Company distributes its fine furniture products through an extensive
worldwide distribution network that includes (i) more than 25,000 independent
retail locations, including national and regional chains, department stores,
specialty stores and more than 570 galleries within retail stores; (ii) more
than 90 independent dedicated stores exclusively selling Company products and
(iii) 14 Company operated Beacon Hill-Registered Trademark- decorator showrooms.
The Company also sells its fine furniture domestically and internationally to
the hospitality and government markets, and has recently begun offering product
information through non-traditional channels such as the Internet. The Company
distributes over 25,000 different decorative home furnishing fabrics through
numerous distribution channels, including the Beacon Hill-Registered Trademark-
showrooms, to an extensive customer base consisting of over 30,000 retailers,
decorators and designers worldwide. The Company also sells decorative home
furnishing fabrics to furniture manufacturers. The Company's extensive
distribution network provides limited dependence on any one customer. In 1996,
the Company's 20 largest customers represented only 18.5% of net sales, with no
single customer representing more than 3.0%. The Company believes it has more
active accounts than any other manufacturer in the furniture or home furnishings
industry.
FINE FURNITURE
The Company believes that it is the most comprehensive and complete resource
in the residential furniture industry, capable of supplying up to 75% of the
product demands of most furniture retailers, whether local, regional or national
in scope. This, in turn, enables the Company to secure additional display space
from retailers, who increasingly are relying on a smaller number of larger
suppliers. The Company sells its fine furniture products worldwide primarily
through approximately 580 commissioned independent representatives. The Company
offers substantial services to retailers to support their marketing efforts,
including national advertising, merchandising and display programs. The Company
also displays its fine furniture products at the semi-annual International Home
Furnishings Market in High Point, North Carolina.
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The following table illustrates the distribution of the Company's fine
furniture products by brand:
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DISTRIBUTION CHANNEL
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INDEPENDENT DEDICATED DESIGNER
RETAILERS GALLERIES STORES SHOWROOMS
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BenchCraft-Registered Trademark- Berkline-Registered Trademark- Drexel Beacon
Berkline-Registered Trademark- Drexel Heritage-Registered Trademark- Hill-Registered Trademark-
Drexel Heritage-Registered Trademark- Drexel
Heritage-Registered Trademark- Henredon-Registered Trademark- Heritage-Registered Trademark-
Henredon-Registered Trademark- La Henredon-Registered Trademark-
La Barge-Registered Trademark- La
Barge-Registered Trademark- Lexington-Registered Trademark- Barge-Registered Trademark-
Lexington-Registered Trademark- Maitland-Smith-TM- Lexington-Registered Trademark-
Maitland-Smith-TM- Maitland-Smith-TM-
Universal-Registered Trademark-
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Furniture retailers remain the most significant distribution channel in the
industry, and the Company is committed to maintaining these important
relationships. The Company's diverse product offerings and national distribution
enable it to effectively service national retailers such as Federated Department
Stores, Heilig-Meyers, J.C. Penney, Levitz, Montgomery Ward and Sears, and large
regional retailers such as Baers Furniture, Breunners, Homestead House, Kittles
Furniture and Wayside Furniture, as well as independent single store retailers
nationwide. As the furniture retailing industry consolidates, large retailers
are commanding an increasing presence, and management believes that the Company
is better positioned than its competitors to meet their needs.
The Company has developed gallery programs for its
Henredon-Registered Trademark-, Drexel Heritage-Registered Trademark-,
Lexington-Registered Trademark-, Berkline-Registered Trademark-,
Maitland-Smith-TM- and La Barge-Registered Trademark- product lines with more
than 570 retailers. Galleries are dedicated space within a larger retail store
that display products in complete and fully accessorized room settings instead
of as individual pieces. This presentation format encourages consumers to
purchase an entire room of furniture instead of individual pieces from different
manufacturers. The Company believes that stores with galleries result in higher
sales per square foot than furniture stores without galleries.
The Company also sells its products through dedicated stores that
exclusively offer the Company's products. Drexel Heritage-Registered Trademark-
products are sold through Drexel Heritage Showcase Stores and the newly
formatted Home Inspirations Stores, a group of more than 90 independently owned
and operated stores which sell Drexel Heritage-Registered Trademark- products
exclusively in a gallery format. Each store employs a consistent, but not
identical, lifestyle concept, with products displayed in complete rooms and
eclectic settings, which include furnishings, wall decor, window treatments and
accessories. The Company also operates seven dedicated retail stores for its
Universal-Registered Trademark- products in Asia and owns and operates a
Maitland-Smith-TM-retail store in Hong Kong.
The Company operates the Beacon Hill-Registered Trademark- Showrooms, a
national network of 14 showrooms for the sale of primarily "best" and "premium"
price category products to interior design professionals and their clients. The
showrooms are located in Atlanta, Boston, Chicago, Cleveland, Dallas, Dania
(Florida), Houston, Los Angeles, New York, Philadelphia, San Francisco, Seattle,
Troy (Michigan) and Washington, D.C. Approximately 50% of Beacon Hill's sales
are of the Company's fine furniture products, primarily
Henredon-Registered Trademark-, Maitland-Smith-TM-, Drexel
Heritage-Registered Trademark- and Lexington-Registered Trademark-. In addition
to Company products, Beacon Hill offers products manufactured by such
well-known, high-end furniture manufacturers as Kindel Furniture and John
Widdicomb Co. The Beacon Hill Showrooms feature Robert Allen's Beacon
Hill-Registered Trademark- fabric line, which is produced exclusively for sale
in the Company's showrooms.
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DECORATIVE HOME FURNISHING FABRICS
The Company distributes its Robert Allen-TM- products through numerous
distribution channels, including its own showroom and approximately 54
commissioned, independent representatives, to over 30,000 retailers, decorators
and designers worldwide. The Company sells its Ametex-TM- products through
approximately 26 commissioned independent representatives, primarily to
furniture manufacturers, bedding and drapery manufacturers and contract
purchasing agents. Sunbury-TM- products are sold to furniture manufacturers and
distributors of decorative home furnishing fabrics in the United States and
Canada by eight commissioned sales representatives. The Company's decorative
home furnishing fabrics are also sold to decorators and designers through the
Company's Beacon Hill-Registered Trademark- showrooms, which offer Robert
Allen-TM- and Ramm, Son & Crocker-TM- fabrics on a commission basis.
MARKETING AND ADVERTISING
In partnership with its selected retailers, the Company works to strengthen
its brand equity with consumers and increase their purchases of Company
products. These consumers are carefully profiled through marketing research and
are then targeted through advertising programs on the national and local levels,
comprehensive cataloging, education through focused marketing events and
selected promotional programs.
Retailers are also carefully selected to market the Company's products to a
wide range of consumers. These retailers, in turn, are supported with innovative
training for their sales people, design assistance for their retail displays of
Company products, noted speakers and planning support for their focused
marketing events, visually stimulating point of purchase materials, catalogs and
sales materials, direct communications linkage to the manufacturers for timely
stock and status information and promotional support.
Architects, designers and decorators who specify and sell Company products
are targeted through trade publications such as INTERIOR DESIGN, and receive
exclusive sales support through Beacon Hill Showrooms. Value added services such
as continuing education and special events with shelter publications draw new
designers into the showrooms and build designer loyalty.
Contract, government and hospitality specifiers and purchasers receive
specialized services through the Company's contract division. A global sales and
marketing network is well-supported from initial presentation through project
completion, with extensive cataloging, on-line and customized products, and
specialized delivery services.
The Company builds brand equity and increases consumer awareness through
editorial coverage and advertising in leading shelter magazines. Targeting
specific consumer demographics, advertisements are placed in publications which
include ARCHITECTURAL DIGEST, COUNTRY HOME, COUNTRY LIVING, HOUSE BEAUTIFUL,
HOUSE & GARDEN, MARTHA STEWART LIVING, METROPOLITAN HOME, TRADITIONAL HOME and
VICTORIA. The large combined volume of advertising from all product lines gives
the Company leverage in purchasing advertising. Innovative products continue to
draw the attention of editors for major shelter magazines. Their valuable
editorial coverage favorably positions products with consumers at no cost to the
Company.
Responding to consumers' desire for home furnishings information, the
Company has created interactive sites on the Internet which allow users to
browse its product lines, learn more about the Company and be directed to local
retailers.
MANUFACTURING
The Company believes that it has a modern and efficient manufacturing base
that will enable it to meet the manufacturing requirements of its business
strategy over the next several years without the necessity of making significant
additional capital expenditures to expand capacity.
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Management has adopted a continuous improvement philosophy with particular
emphasis on improving customer and consumer satisfaction. Pursuant to this
continuous improvement philosophy, the Company is committed to achieving
significant improvements in productivity, quality and service levels to benefit
its retailer partners and consumers.
Currently, the Company manufactures its products worldwide through 89
manufacturing and distribution facilities, with more than 24 million square
feet, including over 20 million square feet of production space. These
facilities are strategically located to efficiently supply the Company's
worldwide distribution network. The Company's facilities have benefited from
investment in state-of-the-art equipment and other capital expenditures in
excess of $270.0 million over the past five years. The Company is also beginning
to realize the benefits from its continuous improvement programs directed at
manufacturing methods and process improvements incorporating just-in-time
logistics, cellular concepts, quality circles, reduced cycle times, laser
cutting methodologies, computerization and related modern production methods.
The Company utilizes certain specialized facilities dedicated to
manufacturing a limited number of products, as well as sub-contracted
manufacturing facilities. The Company also promotes inter-company sourcing of
products and components. These steps have helped the Company balance its global
manufacturing capacity and increase its operating efficiency.
The Company's fine furniture lines are produced in domestic manufacturing
and distribution facilities located in North Carolina, Tennessee, Michigan,
Massachusetts, South Carolina, Mississippi, Georgia, Illinois, and California,
and internationally in facilities located in Taiwan, Singapore, Malaysia, China,
Indonesia, Hong Kong, Thailand, the United Kingdom, Canada, Sweden, Japan and
Germany.
With manufacturing and distribution facilities encompassing over five
million square feet, the Company is the largest U.S. furniture manufacturer in
Asia, and this provides it with access to a highly-skilled (in such areas as
intricate veneering and hand carving), low-cost work force, and to scarce raw
materials such as Chinese oak, exotic woods, wicker and rattan. Five of the
Asian facilities with over 1.0 million square feet have been built or renovated
in the last five years and all are equipped with up-to-date manufacturing
technology. In addition, the Asian manufacturing facilities have developed a
process to use readily available rubber tree wood, a fast-growing wood resource.
Substantially all of the Company's Robert Allen-TM- and Ramm, Son &
Crocker-TM- decorative home furnishing fabrics are manufactured for the Company
by third parties.
RAW MATERIALS AND SUPPLIERS
The principal raw materials used by the Company in the manufacture of its
products include: lumber, finishing products (stains, sealants and lacquers),
glue, steel, leather, cotton, wool, synthetic and vinyl fabrics, polyester
batting and polyurethane foam. The various types of wood used in the Company's
products are purchased both domestically and internationally. Management
believes that its supply sources of those materials are adequate. The Company
has experienced no significant problems in supplying its operations. Although
the Company has ongoing relationships with certain suppliers of raw materials,
the Company believes that there are a number of reliable vendors available
contributing to its ability to obtain competitive pricing for raw materials. Raw
material prices fluctuate over time depending on supply, demand and other
factors. Increases in raw material prices may have a short-term impact on the
Company's financial performance. Under the provisions of the Clean Air Act of
1970, as amended, (the "CAA"), in December 1995, the United States Environmental
Protection Agency promulgated hazardous air emission standards applicable to the
wood furniture industry, known as the NESHAPs. The furniture industry and its
suppliers are attempting to develop water-based and other forms of compliant
finishing material to replace commonly-used, organic-based finishes which are a
major source of regulated emissions. The Company cannot at this time estimate
how these new standards will affect the Company. See "--Environmental
Regulations."
10
<PAGE>
COMPETITION
The furniture manufacturing industry is highly competitive and includes a
large number of domestic and foreign manufacturers. The industry is highly
fragmented, and no one company is dominant. Competition is generally based on
product quality, brand name recognition, price and service. The Company's
furniture products compete with products made by a number of furniture
manufacturers, including Furniture Brands International, Inc., La-Z-Boy Chair
Company, Klaussner Furniture Industries Inc., LADD Furniture, Inc. and Bassett
Furniture Industries, Inc., as well as numerous smaller producers. In decorative
home furnishing fabrics, competition is based upon design, price, style and
quality, and competitors include Schumacher/Waverly, Richloom and Mastercraft.
EMPLOYEES
As of December 31, 1996, the Company employed approximately 33,900 persons.
Virtually all are non-union, although approximately 30%, most of whom are
employed in Asia, are subject to certain government-mandated terms of
employment. The Company believes it has good relations with its employees.
INTELLECTUAL PROPERTY
The Company owns a number of trademarks, trade names, copyrights, licenses
and patents. The Company believes that many of its trademarks and trade names
are important to the Company because they are well recognized and associated
with quality and value in the home furnishings industry. The Company
aggressively protects its major trademarks, trade names and copyrights.
ENVIRONMENTAL REGULATIONS
The Company is subject to a wide range of federal, state and local
environmental laws and regulations relating to the protection of the
environment, worker health and safety and the emission, discharge, storage,
treatment and disposal of hazardous materials. These laws include the CAA, the
Resource Conservation and Recovery Act, the Federal Water Pollution Control Act,
and the Comprehensive Environmental Response, Compensation and Liability Act
("Superfund" or "CERCLA"). The Company believes that it is in material
compliance with applicable federal, state, local and foreign environmental
regulations. Compliance with these regulations has not in the past had any
material effect on the Company's earnings, capital expenditures or competitive
position; however, the effect of such compliance on the Company in the future
cannot be determined. The Company does not anticipate making any material
capital expenditures for environmental control facilities in the foreseeable
future.
Under the provisions of the CAA, in December 1995, the United States
Environmental Protection Agency promulgated hazardous air emission standards for
the wood furniture industry. These regulations, known as the NESHAPs, will
require the Company to reduce emissions of certain hazardous air pollutants by
November 1997. In order to comply with NESHAPs, the Company intends to
reformulate certain furniture finishes or institute process changes. The
furniture industry and its suppliers are attempting to develop water-based and
other forms of compliant finishing materials to replace commonly used, organic-
based finishes which are a major source of regulated emissions. The Company
cannot at this time estimate the impact of these new standards or other future
regulations on the Company's operations and future capital expenditure
requirements, or the cost of compliance. There can be no assurance that
reformulation of finishes or process changes will not adversely affect the
quality or durability of certain of the Company's products. Furthermore, if the
Company cannot satisfy applicable regulatory requirements following
reformulation or process changes, the Company likely will be required to install
air pollution control technology at certain of its facilities. However, while
there can be no assurance, the Company does not believe at this time that its
future financial performance or the quality or the durability of its products is
likely to be materially adversely impacted as a result of these regulations.
11
<PAGE>
As the result of historical operations, spills and releases of hazardous
substances may have occurred at several of the Company's facilities. These
releases may warrant further investigation, including soil and groundwater
sampling. If hazardous substances are detected in the soil or groundwater, the
Company would be required under CERCLA or its state analogues to incur expenses
relating to the investigation and remediation of these releases. The Company
does not believe that the costs associated with investigating or remediating
these releases will have a material adverse effect on the Company's financial
condition, operating expenses or earnings. Furthermore, pursuant to the
Acquisition Agreement, Masco will indemnify the Company for certain liabilities
in excess of specified amounts relating to the existence of hazardous substances
at certain of the facilities.
The Company has been named as a potentially responsible party at a total of
seven non-owned contaminated sites, including Superfund sites. The Company
presently believes that any potential liability relating to these sites will not
have a material adverse effect on the Company's earnings, capital expenditures
or competitive position. Actual resolution of these matters, however, could
differ from management's estimates and assumptions.
OTHER GOVERNMENT REGULATIONS
The Company's operations must meet extensive federal, state, and local
regulatory standards in the areas of health and safety. Historically, these
standards have not had any material adverse effect on the Company's sales or
operations.
BACKLOG
The combined backlog of the Company as of December 31, 1996 aggregated
approximately $315 million, compared to approximately $314 million as of
December 31, 1995.
12
<PAGE>
ITEM 2. PROPERTIES
The following list includes the Company's principal manufacturing facilities
by location:
<TABLE>
<S> <C>
California City of Industry and Whittier
Georgia Atlanta
Illinois Alsip
Massachusetts Holyoke
Michigan Holland
Mississippi Baldwin, Blue Mountain, New Albany and Ripley(2)
North Carolina Black Mountain, Drexel, Goldsboro, Hickory(2), High Point(3),
Hildebran(2), Lexington(5), Linwood, Longview, Marion(2),
Mocksville, Morganton(5), Mt. Airy, Shelby, Spruce Pine(2) and
Whittier
Pennsylvania Sunbury
South Carolina Kingstree
Tennessee Lenoir City, Livingston, Morristown(6) and Rockwood
Canada Mississauga, Ontario; and Ville D'Anjou, Quebec
China (P.R.C.) Fuzhou, Guang Dong, Guangzhou, Tianjin and Xian
Germany Tangermunde
Great Britain Silsden and Warminster, England; and Aberdare, Wales
Indonesia Semarang
Malaysia Johor and Kedah(2)
Philippines Cebu
Singapore Singapore(2)
Sweden Skene
Taiwan Kaohsiung, Ping Tung and Tao Yuan Hsian
</TABLE>
Note: The parentheticals denote multiple facilities in that location.
As of December 31, 1996, the Company operated manufacturing and distribution
facilities, showrooms, and retail and office space with a total area of
approximately 26.4 million square feet. The Company owns approximately 20.0
million square feet and leases approximately 6.4 million square feet.
The Company's corporate headquarters are located in Thomasville, North
Carolina and are owned by the Company.
The Company's buildings, machinery and equipment have been generally
well-maintained, are in good operating condition, and are adequate for current
production requirements.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is a party to various legal actions in the
normal course of its business. The Company is not currently a party to any
litigation which, if adversely determined, would have a material adverse effect
on the liquidity or results of operations of the Company.
13
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Holdings, the sole shareholder of the Company, executed a consent on October
31, 1996, whereby Holdings elected Martin D. Walker as a Director of the
Company.
------------------------
Information contained herein contains "forward-looking statements" which can
be identified by the use of forward-looking terminology such as "believes,"
"expects," "may," "will," "should," or "anticipates" or the negative thereof or
other similar terminology, or by discussions of strategy. The Company's actual
results could differ materially from those anticipated by any such
foward-looking statements as a result of certain factors, including matters
discussed herein and factors affecting the home furnishings industry in general,
fluctuations in the price and supply of raw materials, competition and the
dependence of the Company on its managerial, manufacturing and sales and
marketing personnel.
14
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established trading market for the common stock of the Company.
As of December 31, 1996, Holdings was the only holder of the common stock of
the Company. Holdings is a privately owned company, the capital stock of which
is held by members of management, Masco, 399 Ventures, Inc. and other private
investors.
There have been no cash dividends declared on the common stock of the
Company.
15
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
(DOLLARS IN MILLIONS)(1)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
----------------------------------------------------- -----------
1/1/96 8/6/96
TO TO
1992 1993 1994 1995 8/5/96 12/31/96
--------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................ $ 1,589.6 $ 1,763.5 $ 1,897.5 $ 1,992.6 $ 1,147.9 $ 857.5
Cost of sales 1,192.2 1,326.8 1,434.0 1,501.0 870.7 638.2
--------- --------- --------- --------- --------- -----------
Gross profit....................................... 397.4 436.7 463.5 491.6 277.2 219.3
--------- --------- --------- --------- --------- -----------
Selling, general, and administrative(2).............. 334.8 368.5 386.8 397.8 222.2 144.5
--------- --------- --------- --------- --------- -----------
Operating profit................................... 62.6 68.2 76.7 93.8 55.0 74.8
--------- --------- --------- --------- --------- -----------
Interest expense(3).................................. 84.1 82.7 87.1 94.8 52.7 20.0
Other, net(4)........................................ 2.6 3.2 7.3 8.3 3.5 6.7
--------- --------- --------- --------- --------- -----------
Income (loss) before income taxes.................. (24.1) (17.7) (17.7) (9.3) (1.2) 48.1
Income taxes......................................... 1.0 8.0 6.1 7.0 6.8 16.8
--------- --------- --------- --------- --------- -----------
Net income (loss).................................. $ (25.1) $ (25.7) $ (23.8) $ (16.3) $ (8.0) $ 31.3
--------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- -----------
OTHER FINANCIAL DATA:
Gross profit margin.................................. 25.0% 24.8% 24.4% 24.7% 24.2% 25.6%
EBITDA(5)............................................ $ 120.5 $ 132.6 $ 139.5 $ 160.1 $ 91.8 $ 87.7
EBITDA margin........................................ 7.5% 7.5% 7.4% 8.0% 8.0% 10.2%
Depreciation & amortization.......................... $ 60.5 $ 66.8 $ 66.4 $ 67.9 $ 39.3 $ 15.4
Cash provided by (used for) operating activities..... (56.2) (42.9) (0.7) 34.3 39.7 105.8
Cash (used for) investing activities................. (51.1) (77.9) (53.1) (57.5) (16.4) (705.5)
Cash provided by (used for) financing activities..... 106.3 129.9 53.1 15.8 (21.9) 622.1
BALANCE SHEET DATA:
Working capital(6)................................... $ 669.9 $ 724.0 $ 743.3 $ 749.1 -- $ 496.1
Total assets......................................... 1,743.7 1,853.5 1,970.5 1,903.9 -- 1,190.7
Total debt........................................... 124.5 61.9 45.2 27.2 -- 444.6
Total liabilities.................................... 343.0 295.9 274.4 282.9 -- 737.4
Masco net investment & advances(7)................... 1,391.7 1,557.6 1,633.1 1,621.0 -- --
Stockholder's equity................................. -- -- -- -- -- 453.4
</TABLE>
- ------------------------
(1) Results include The Berkline Corporation, which was acquired in April 1994
in a pooling-of-interests transaction. The financial information of the
Predecessor includes certain businesses of Holdings.
(2) Included in selling, general and administrative expenses of the Predecessor
are general corporate expenses which represent certain corporate staff
support and administrative services provided by Masco. These expenses, which
were charged to the Predecessor by Masco, consisted of $9.8, $10.5, $12.7
and $16.0 in 1992 through 1995, respectively, and $9.4 for the period
January 1, 1996 to August 5, 1996.
(3) Interest expense of the Predecessor consists primarily of interest on
advances from Masco.
(4) Other, net, includes receivables securitization costs of $4.4 and
amortization of deferred charges of $1.7 for the period August 6, 1996 to
December 31, 1996.
(5) EBITDA is defined as net income (loss) before interest expense, income
taxes, depreciation and amortization expense (including amortization of
sample book expenditures) and certain other non-cash charges. Such other
non-cash charges were $0, $0.7, $3.8, $6.7 for 1992 through 1995,
respectively, and were $1.0 for the period January 1, 1996 to August 5, 1996
and $(0.2) for the period August 6, 1996 to December 31, 1996. The Company
believes that EBITDA provides additional information for determining its
ability to meet debt service requirements. EBITDA does not represent and
should not be considered as an alternative to net income or cash flow from
operations as determined by generally accepted accounting principles, and
EBITDA does not necessarily indicate whether cash flow will be sufficient
for cash requirements. Not every company calculates EBITDA in exactly the
same fashion. As a result, EBITDA as presented above may not necessarily be
comparable to similarly titled measures of other companies.
(6) Working capital is defined as total current assets (excluding cash and cash
equivalents) less total current liabilities (excluding current maturities of
long-term debt).
(7) Advances from Masco were $943.4, $1,091.0, $1,192.0, and $1,195.0 at
December 31, 1992 through 1995, respectively.
16
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company is the largest manufacturer and marketer of home furnishing
products. Approximately 86% of net sales are derived from residential furniture,
which includes decorative accessories ("fine furniture"). Decorative home
furnishing fabrics accounted for the remaining 14% of net sales.
The following discussion and analysis of the consolidated financial
condition and results of operations should be read in conjunction with the
Consolidated Financial Statements and Notes thereto.
THE ACQUISITION TRANSACTIONS
The Company was formed in May 1996 for the purpose of acquiring the
Predecessor. On August 5, 1996, Holdings acquired the Predecessor from Masco for
approximately $1.1 billion and contributed substantially all of the businesses
acquired to the Company. The purchase price of $1.1 billion was financed by: (i)
senior bank facilities ($325.0 million); (ii) senior subordinated notes ($200.0
million); (iii) equity contribution ($421.0 million); and (iv) proceeds from
sale of accounts receivable ($155.0 million).
The acquisition was accounted for using the purchase method of accounting
and, accordingly, the purchase price was allocated to the acquired assets and
assumed liabilities based upon estimated fair values as of the closing date of
the acquisition. This allocation resulted in a reduction of non-current assets,
principally property and equipment.
As a result of the acquisition and new basis of accounting, the Company's
financial statements for the periods subsequent to the acquisition are not
comparable to the Predecessor's financial statements for the periods prior to
the acquisition.
The unusual tax rate for periods prior to August 6, 1996 is primarily the
result of state and local taxes and taxes on foreign earnings calculated at
rates in excess of U.S. federal statutory rates.
RESTRUCTURING INITIATIVES AND INVENTORY REDUCTION
In connection with the acquisition, management has developed a restructuring
plan. The plan was finalized in December 1996 upon approval by the Company's
Board of Directors and implementation is expected to be completed in 1997. As
permitted by Emerging Issues Task Force ("EITF") Issue 95-3 "Recognition of
Liabilities in Connection with a Purchase Business Combination," the total cost
of the plan, which management estimates to be approximately $28.3 million, was
included as part of the purchase price allocation. The Company does not expect
any significant impact on its liquidity as a result of this plan.
The restructuring plan provides for severance costs associated with the
closure of various facilities, costs associated with the relocation of equipment
and office facilities and other closure related expenses.
Management has also initiated a plan to reduce inventory levels to generate
cash flow and reduce carrying costs. At this time, management does not believe
this inventory reduction program will have a material adverse effect on future
results of operations or the financial condition of the Company.
17
<PAGE>
RESULTS OF OPERATIONS
For the purposes of the discussions that follow, the results of operations
for the period August 6, 1996 through December 31, 1996 have been combined with
the results of the Predecessor.
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995
Net sales were $2,005.4 million for the year ended December 31, 1996, an
increase of $12.8 million, or 0.6%, from $1,992.6 million for the year ended
December 31, 1995. Net sales of fine furniture increased 0.7% to $1,733.3
million for the year ended December 31, 1996 from $1,721.2 million for the year
ended December 31, 1995. Net sales of fine furniture grew primarily due to
recent product introductions and modest increased industry demand. Net sales of
decorative home furnishings fabrics increased 0.3% to $272.1 million for the
year ended December 31, 1996 from $271.4 million for the year ended December 31,
1995, primarily due to strength in the woven segment of the market and improved
business conditions.
Gross profit was $496.5 million for the year ended December 31, 1996, an
increase of $4.9 million, or 1.0%, from $491.6 million for the comparable period
of 1995. This increase was primarily attributable to the impact of a modest
increase in sales and the gross profit margin. Gross profit margin improved from
August 6, 1996 to December 31, 1996 primarily due to the reduced depreciation
expense which resulted from the reduction in carrying value of depreciable fixed
assets due to the allocation of purchase price. This improvement was offset by
decreases in the gross profit margin earlier in 1996, which were primarily the
result of temporary plant closings due to bad weather and start-up costs related
to substantial new product introductions.
Selling, general and administrative expenses were $366.7 million for the
year ended December 31, 1996, a decrease of $31.1 million, or 7.8%, from $397.8
million for the comparable period of 1995. As a percentage of net sales,
selling, general and administrative expenses improved to 18.3% for the year
ended December 31, 1996 from 20.0% for the year ended December 31, 1995. Selling
expense was 11.0% of net sales as compared to 11.8% for 1995, and general and
administrative expenses decreased to 7.3% of net sales from 8.2% in 1995. The
decrease in general and administrative expenses reflects the benefits of the
Company's cost reduction initiatives implemented in late 1995, combined with the
net decrease in general and administrative expenses incurred since August 6,
1996 as a stand alone company when compared to the management fees previously
charged to the Company by Masco.
Operating profit increased to $129.8 million for the year ended December 31,
1996, an increase of $36.0 million, or 38.4%, from $93.8 million for the
comparable period of 1995. As a percentage of net sales, operating profit
increased to 6.5% for the year ended December 31, 1996 from 4.7% for the
comparable period of 1995. This improvement was achieved primarily for the
reasons discussed above.
Interest expense was $72.6 million for the year ended December 31, 1996, a
decrease of $22.2 million, or 23.4%, from the year ended December 31, 1995. This
decrease was a result of lower average debt outstanding during the period from
August 6, 1996 to December 31, 1996. Proceeds from debt issued in connection
with the acquisition were used to repay, in part, the funds previously advanced
by Masco. The decrease in interest expense as a result of the lower average debt
outstanding was partially offset by higher average borrowing rates from August
6, 1996 to December 31, 1996.
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994
Net sales were $1,992.6 million for the twelve months ended December 31,
1995, an increase of $95.1 million, or 5.0%, from $1,897.5 million for the year
ended December 31, 1994. Net sales of fine furniture increased 6.8% to $1,721.2
million in 1995 from $1,611.5 million in 1994. This increase in net sales of
fine furniture was primarily the result of the success of the "Lifestyles"
collections such as The World of Bob Timberlake-TM-, increased sales of motion
furniture products and increased sales of decorative accessories. Net sales of
decorative home furnishing fabrics decreased 5.1% to $271.4 million in 1995 from
$285.9
18
<PAGE>
million in 1994. This decline was primarily the result of softness in the
printed fabrics market and management's focus on reducing the number of lower
margin product lines.
Gross profit was $491.6 million for the year ended December 31, 1995, an
increase of $28.1 million, or 6.1%, from $463.5 million for the year ended
December 31, 1994, primarily due to an increase in net sales and gross profit
margin. Gross profit margin increased to 24.7% in 1995 from 24.4% in the prior
year. This increase was primarily due to continued rationalization of
manufacturing facilities that resulted in greater capacity utilization,
increased manufacturing efficiency due to cost reduction programs, continued
rationalization of raw materials purchasing and personnel reductions. The
Company also benefited from the elimination of certain low margin product lines.
Selling, general and administrative expenses were $397.8 million for the
year ended December 31, 1995, an increase of $11.0 million, or 2.8%, from $386.8
million for the year ended December 31, 1994. As a percentage of net sales,
selling, general and administrative expenses decreased slightly to 20.0% for the
year ended December 31, 1995 from 20.4% for the year ended December 31, 1994.
Selling expense was 11.8% of net sales as compared to 11.6% for 1994, and
general and administrative expenses decreased to 8.2% of net sales from 8.8% for
1994. Included in selling, general and administrative expenses were general
corporate expenses which represent certain corporate staff support and
administrative services provided by Masco.
Operating profit increased to $93.8 million for the year ended December 31,
1995, an increase of $17.1 million, or 22.3%, from $76.7 million for the year
ended December 31, 1994. As a percentage of net sales, operating profit
increased to 4.7% for the year ended December 31, 1995 from 4.0% for the same
period in 1994. This improvement was achieved primarily for the reasons
discussed above.
Interest expense was $94.8 million for the year ended December 31, 1995, an
increase of $7.7 million or 8.9% from the year ended December 31, 1994. This
increase was a result of higher average interest rates during 1995.
PRO FORMA RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED(A)
--------------------------
<S> <C> <C>
DEC. 31, DEC. 31,
1996 1995
------------ ------------
Net sales........................................................ $ 2,005.4 $ 1,975.1
Gross profit..................................................... 502.0 496.5
Operating profit................................................. 147.9 125.2
Net income....................................................... 48.4 28.3
</TABLE>
- ------------------------
(a) The Note to Financial Statements captioned "Pro Forma Supplementary Data" as
set forth in Item 8 of this report should be read in conjunction with this
information.
On a pro forma basis for the year ended December 31, 1996 (after giving
effect to the acquisition transactions as if they had occurred on January 1,
1995), the Company's operating income was $147.9 million, an increase of $22.7
million, or 18.1%, from pro forma operating income of $125.2 million for the
comparable period of 1995. The Company's net income was $48.4 million, an
increase of $20.1 million or 71% from pro forma net income of $28.3 million for
the comparable period of 1995. This increase is primarily attributable to
increased sales, reduced interest expense due to repayments of long term debt,
and reductions, since August 5, 1996, in actual selling, general and
administrative expenses resulting from reductions in corporate overhead expenses
associated with the acquisition and the elimination of certain marketing and
consulting arrangements during 1996. Had the reductions in corporate overhead
expenses resulting from the acquisition been in effect for the entire year ended
December 31, 1996, pro forma EBITDA would have increased by $4.3 million to
$182.8 million. There is no assurance that the Company will actually realize
such savings in any future periods.
19
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs arise primarily from debt service on the
indebtedness incurred in
connection with the transactions, working capital needs and the funding of
capital expenditures.
Principal and interest payments under the Company's long-term debt
arrangements represent significant liquidity requirements for the Company. At
December 31, 1996, the maturities of long-term debt during each of the next five
years were approximately as follows: 1997-$19.0 million; 1998-$18.6 million;
1999-$16.9 million; 2000-$17.9 million; 2001-$27.7 million; thereafter $344.6
million. During October 1996, the Company purchased an interest rate collar
resulting in $250 million of the Company's long term debt being subject to an
interest rate ceiling of 8.0% and floor of 5.45%.
The Company made capital expenditures of $30.3 million for the year ended
December 31, 1996. The Company believes that as a result of the availability of
excess capacity in its manufacturing facilities, no significant additional
capital expenditures will be required to expand capacity. The Company's ability
to make capital expenditures is subject to certain restrictions under the
Company's long-term debt arrangements.
The Company's principal source of cash to fund its liquidity needs is its
net cash from operating activities and availability of borrowings under its
revolving credit facility. Net cash from operating activities for the year ended
December 31, 1996 was $139.5 million, an increase of $105.2 million from $34.3
million in the comparable period of 1995, primarily as a result of increases in
earnings and decreases in working capital.
As of December 31, 1996, the amount available under the Company's revolving
credit facility was $150 million (less the face amount of existing letters of
credit of $11.4 million) and no amounts were outstanding. Amounts available
under the revolving credit facility may be used for working capital and general
corporate purposes (including up to $50.0 million for letters of credit),
subject to certain limitations under the Company's long-term debt arrangements.
The Company believes that cash generated from operations, together with the
amounts available under the revolving credit facility, will be adequate to meet
its debt service requirements, capital expenditures and working capital needs
for the foreseeable future, although no assurance can be given in this regard.
In connection with the issuance of the Notes, the Company's domestic
operating subsidiaries fully and unconditionally guarantee the Company's
performance under the Notes on a joint and several basis. There are no
restrictions under the Company's financing arrangements on the ability of the
Company's domestic operating subsidiaries to distribute funds to the Company in
the form of cash dividends, loans or advances.
INTERNATIONAL OPERATIONS
The Company conducts operations in several foreign countries including
Canada, Taiwan, Singapore, the Philippines, China, Malaysia, Indonesia, Thailand
and several European countries.
The Company's international operations may be subject to volatility because
of currency fluctuations, inflation and changes in political and economic
conditions in these countries. Most of the revenues and costs and expenses of
the Company's operations in these countries are denominated in the local
currencies. The financial position and results of operations of the Company's
foreign subsidiaries are measured using the local currency as the functional
currency, although the dollar would be used if any of these countries were
deemed hyperinflationary in accordance with Statement of Financial Accounting
Standards No. 52.
Financial information concerning the Company's export sales and foreign
operations, including the net sales, operating profit and assets which are
attributable to the Company's operations in the United States and in foreign
countries, are set forth in Item 8 of this Report in the Notes to Financial
Statements captioned "Geographic Information."
20
<PAGE>
INFLATION
The Company does not believe that inflation has had a material impact on its
financial position or results of operations during the periods covered by the
Financial Statements and the related notes thereto included herein.
SEASONALITY
The Company does not believe that its results of operations fluctuate
materially due to seasonality.
21
<PAGE>
ITEM 8. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.:
We have audited the accompanying consolidated balance sheet of LIFESTYLE
FURNISHINGS INTERNATIONAL LTD. and subsidiaries as of December 31, 1996 and the
related consolidated statements of operations and cash flows for the period from
August 6, 1996 to December 31, 1996. We have also audited the combined balance
sheet of the Masco Home Furnishings Group (certain subsidiaries of Masco
Corporation, as described in Note 2, and the Company's predecessor) as of
December 31, 1995, and the related combined statements of operations and cash
flows for the period from January 1, 1996 to August 5, 1996 and the years ended
December 31, 1995 and 1994. These financial statements are the responsibility of
the Companies' management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The combined financial statements for the periods ended prior to August 6, 1996
do not reflect the new basis of accounting established by the acquisition of the
Masco Home Furnishings Group as described in Note 1, and are presented on the
historical cost basis existing prior to the acquisition period.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of LIFESTYLE
FURNISHINGS INTERNATIONAL LTD. and subsidiaries as of December 31, 1996, and the
consolidated results of their operations and their cash flows for the period
from August 6, 1996 to December 31, 1996, and the combined financial position of
the Masco Home Furnishings Group as of December 31, 1995, and the combined
results of their operations and their cash flows for the period from January 1,
1996 to August 5, 1996 and the years ended December 31, 1995 and 1994, in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Greensboro, North Carolina
February 18, 1997
22
<PAGE>
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONSOLIDATED COMBINED
COMPANY PREDECESSOR
------------ ------------
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash investments.......................................................... $ 22,400 $ 17,310
Trade receivables.................................................................. 81,810 298,970
Investment in Receivables Trust.................................................... 51,120 --
Other receivables.................................................................. 46,280 26,450
Inventories........................................................................ 526,300 559,940
Prepaid expenses................................................................... 22,690 26,370
Deferred income taxes.............................................................. 14,080 17,000
------------ ------------
Total current assets........................................................... 764,680 946,040
Property and equipment, net.......................................................... 349,330 484,100
Excess of cost over acquired net assets.............................................. -- 402,280
Notes receivable..................................................................... 7,620 31,010
Other assets......................................................................... 69,100 40,480
------------ ------------
Total assets................................................................... $1,190,730 $1,903,910
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Long-term debt, current............................................................ $ 18,970 $ 25,500
Accounts payable................................................................... 93,030 92,350
Accrued liabilities................................................................ 153,130 87,300
------------ ------------
Total current liabilities...................................................... 265,130 205,150
Long-term debt....................................................................... 425,650 2,150
Other long-term liabilities.......................................................... 46,590 75,570
------------ ------------
Total liabilities.............................................................. 737,370 282,870
------------ ------------
Common stock, $.01 par value, 3,000 shares authorized, 100 shares issued and
outstanding........................................................................ -- --
Additional paid-in capital........................................................... 421,050 --
Retained earnings.................................................................... 31,270 --
Foreign currency translation......................................................... 1,040 --
Masco Net Investment and Advances.................................................... -- 1,621,040
------------ ------------
Total shareholder's equity..................................................... 453,360 1,621,040
------------ ------------
Total liabilities and shareholder's equity..................................... $1,190,730 $1,903,910
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONSOLIDATED
COMPANY COMBINED PREDECESSOR
--------------- -----------------------------------------------
<S> <C> <C> <C> <C>
PERIOD FROM PERIOD FROM PERIOD FROM PERIOD FROM
AUG. 6, 1996 JAN. 1, 1996 JAN. 1, 1995 JAN. 1, 1994
TO TO TO TO
DEC. 31, 1996 AUG. 5, 1996 DEC. 31, 1995 DEC. 31, 1994
--------------- ------------- --------------- ---------------
Net sales.......................................... $ 857,490 $ 1,147,890 $ 1,992,610 $ 1,897,480
Cost of sales...................................... 638,140 870,650 1,500,990 1,434,030
--------------- ------------- --------------- ---------------
Gross profit................................... 219,350 277,240 491,620 463,450
Selling, general and administrative expenses....... 144,580 222,230 397,790 386,800
--------------- ------------- --------------- ---------------
Operating profit............................... 74,770 55,010 93,830 76,650
--------------- ------------- --------------- ---------------
Other expense, net:
Interest expense............................... 19,930 970 2,360 2,250
Interest expense, Masco........................ -- 51,720 92,470 84,840
Other, net..................................... 6,730 3,480 8,260 7,280
--------------- ------------- --------------- ---------------
26,660 56,170 103,090 94,370
--------------- ------------- --------------- ---------------
Income (loss) before income taxes.............. 48,110 (1,160) (9,260) (17,720)
Income taxes....................................... 16,840 6,830 6,980 6,050
--------------- ------------- --------------- ---------------
Net income (loss).............................. $ 31,270 $ (7,990) $ (16,240) $ (23,770)
--------------- ------------- --------------- ---------------
--------------- ------------- --------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONSOLIDATED
COMPANY COMBINED PREDECESSOR
------------- -------------------------------------------
PERIOD FROM PERIOD FROM PERIOD FROM PERIOD FROM
AUG. 6, 1996 JAN. 1, 1996 JAN. 1, 1995 JAN. 1, 1994
TO TO TO TO
DEC. 31, 1996 AUG. 5, 1996 DEC. 31, 1995 DEC. 31, 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss).................................... $ 31,270 $ (7,990) $ (16,240) $ (23,770)
Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities:
Depreciation and amortization.................... 15,430 39,260 67,920 66,380
Bad debt provision, net.......................... 1,580 2,250 6,620 5,720
Deferred income taxes............................ (5,890) (2,610) 4,560 (3,260)
Changes in operating assets and liabilities:
Receivables...................................... (3,710) 39,550 (19,120) (10,240)
Inventories...................................... 34,460 (17,480) 10,390 (38,130)
Prepaid expenses................................. (13,000) (6,720) (14,740) (20,110)
Liabilities...................................... 45,640 (6,610) (5,070) 22,730
------------- ------------- ------------- -------------
Net cash provided by (used for) operating
activities....................................... 105,780 39,650 34,320 (680)
------------- ------------- ------------- -------------
INVESTING ACTIVITIES:
Acquisition of businesses, net of cash acquired...... (645,430) -- -- --
Net investments in Receivables Trust................. (51,120) -- -- --
Capital expenditures................................. (13,820) (16,520) (61,030) (68,790)
Issuance of notes receivable......................... -- -- (10,260) (1,000)
Collection of notes receivable, net.................. 1,670 2,790 5,020 3,710
Other, net........................................... 3,200 (2,640) 8,790 12,970
------------- ------------- ------------- -------------
Net cash used for investing activities............. (705,500) (16,370) (57,480) (53,110)
------------- ------------- ------------- -------------
FINANCING ACTIVITIES:
Proceeds from long-term debt......................... 525,000 87,760 16,200 5,360
Net proceeds from sale of accounts receivable........ 167,000 -- -- --
Capital contribution................................. 76,400 -- -- --
Deferred financing costs............................. (37,590) -- -- --
Repayments of long-term debt......................... (108,690) (87,090) (3,720) (52,090)
Increase (decrease) in Masco net investment and
advances........................................... -- (22,600) 3,280 99,830
------------- ------------- ------------- -------------
Net cash provided by (used for) financing
activities....................................... 622,120 (21,930) 15,760 53,100
------------- ------------- ------------- -------------
CASH AND CASH INVESTMENTS:
Increase (decrease) for the period................... 22,400 1,350 (7,400) (690)
Balance, beginning of period......................... -- 17,310 24,710 25,400
------------- ------------- ------------- -------------
Balance, end of period............................... $ 22,400 $ 18,660 $ 17,310 $ 24,710
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Cash paid for:
Interest............................................. $ 6,200 $ 52,700 $ 94,700 $ 87,000
Income taxes......................................... $ 7,000 $ 10,000 $ 2,000 $ 10,000
</TABLE>
Non-cash transactions:
In addition to the acquisition consideration reflected above, FURNISHINGS
INTERNATIONAL INC., the parent of LIFESTYLE FURNISHINGS INTERNATIONAL LTD.,
issued $285 million in notes and $60 million in equity securities to the seller.
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO FINANCIAL STATEMENTS
1. THE ACQUISITION
LIFESTYLE FURNISHINGS INTERNATIONAL LTD. (the "Company") was formed in May
1996 for the purpose of acquiring (the "acquisition") the Masco Home Furnishings
Group (the "Group" or "Predecessor"). In the formation of the Company, 100
shares of common stock were issued to FURNISHINGS INTERNATIONAL INC. ("FII"),
the Company's sole stockholder. On August 5, 1996, FII acquired the Predecessor
from Masco Corporation ("Masco") for approximately $1.1 billion and contributed
substantially all of the businesses acquired to the Company. The purchase price
of $1.1 billion was financed by: (i) senior bank facilities ($325.0 million);
(ii) senior subordinated notes ($200.0 million); (iii) equity contribution
($421.0 million); and (iv) proceeds from sale of accounts receivable ($155.0
million). (See Note 7 Receivables Facility and Note 8 Long-Term Debt).
The acquisition was accounted for using the purchase method of accounting
and, accordingly, the purchase price was allocated to the acquired assets and
assumed liabilities based upon estimated fair values as of the closing of the
acquisition. This allocation resulted in a reduction of non-current assets,
principally property and equipment.
As a result of the acquisition and new basis of accounting, the Company's
financial statements for the periods subsequent to the acquisition are not
comparable to the Predecessor's financial statements for the periods prior to
the acquisition.
2. BASIS OF PRESENTATION AND ACCOUNTING POLICIES
BASIS OF PRESENTATION. The Consolidated Financial Statements as of December
31, 1996 and for the period from August 6, 1996 to December 31, 1996 include the
accounts of the Company and its subsidiary companies. Inter-company accounts and
transactions are eliminated. In the Notes to the Financial Statements, all
dollar amounts are shown in thousands unless otherwise stated.
The financial information for the periods ended on or prior to August 5,
1996 refers to the Predecessor as it existed prior to the acquisition. The Group
was not a legal entity and included certain Masco subsidiaries whose operations
consisted of the manufacture and sale of home furnishings products including
quality furniture, fabrics and other home furnishings principally in the United
States. The financial position and results of operations of the Predecessor as
presented herein, may not be the same as would have occurred had the Group been
an entity independent of Masco.
Included in selling, general and administrative expenses of the Predecessor
are general corporate expenses which represent certain corporate staff support
and administrative services previously provided by Masco. These expenses were
charged to the Group by Masco based upon approximately 1 percent of sales of
most domestic Group operations. Masco's management believes this method of
allocation was reasonable. Because these services were never contracted with
outsiders nor bids obtained, it is not practical to disclose estimates of what
the cost would have been on a stand alone basis. In addition, the Group
participated in certain programs provided by Masco including various insurance
programs and incentive compensation plans; related costs of these programs that
exceed amounts included in general corporate expenses were separately charged to
the Group by Masco. Outstanding liabilities related to the above services and
programs were included in Masco Net Investment and Advances in the accompanying
balance sheet of the Predecessor.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS. The
preparation of financial statements in conformity with generally accepted
accounting principles requires the Company to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets
26
<PAGE>
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. BASIS OF PRESENTATION AND ACCOUNTING POLICIES (CONTINUED)
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from such estimates and assumptions.
RESTATEMENT. The financial statements of the Predecessor were restated for
all periods presented to reflect the write-down of certain prepaid expenses. In
addition, the 1994 financial statements were restated primarily to reflect the
correction of the accounting for certain Asian joint ventures. As a result of
these restatements, the net loss increased (decreased) by approximately $(0.2)
million for the period January 1, 1996 to August 5, 1996 and $(l.7) million and
$4.5 million for the years ended December 31, 1995 and 1994, respectively.
CASH AND CASH INVESTMENTS. The Company considers all highly liquid
investments with an original maturity of three months or less to be cash and
cash investments.
RECEIVABLES. Accounts and notes receivable are presented net of aggregate
allowances for doubtful accounts of $4.8 million at December 31, 1996 and $9.0
million at December 31, 1995.
DEFERRED CHARGES. Deferred charges, which consist primarily of debt
issuance costs associated with the acquisition, are amortized over the terms of
the related debt using the effective interest method. At December 31, 1996,
deferred charges totaled $38.3 million, net of accumulated amortization of $1.7
million, and were included in Other Assets in the accompanying balance sheet.
PROPERTY AND EQUIPMENT. Property and equipment are stated at acquisition
cost as determined under APB Opinion No. 16 "Business Combinations." Assets
acquired subsequent to the acquisition, including significant betterments to
existing facilities, are recorded at cost. Upon retirement or disposal, the cost
and accumulated depreciation are removed from the accounts and any gain or loss
is included in income. Maintenance and repair costs are charged to expense as
incurred.
DEPRECIATION AND AMORTIZATION. Depreciation is computed principally using
the straight line method over the estimated useful lives of the assets. The
Company generally uses estimated useful lives ranging from 15 to 40 years for
buildings and land improvements, and 3 to 8 years for machinery and equipment.
Depreciation was $7.6 million for the period August 6, 1996 to December 31,
1996, $21.5 million for the period January 1, 1996 to August 5, 1996, and $36.0
million and $34.1 million during 1995 and 1994, respectively.
The Company produces fabric sample books which are used to market some of
its products. The Company capitalizes the cost of these sample books and
amortizes their cost over three years as a selling expense. The unamortized net
cost of the sample books is included in other assets and prepaid expenses and at
December 31, 1996 and 1995 aggregated $20.8 million and $24.4 million,
respectively, and the related amounts charged to selling expense were $5.8
million for the period August 6, 1996 to December 31, 1996, $9.8 million for the
period January 1, 1996 to August 5, 1996 and $17.1 million and $19.3 million
during 1995 and 1994, respectively.
JOINT VENTURES. The Company has investments in several fifty-fifty joint
ventures in Asia which are accounted for on the equity method. At December 31,
1996 and 1995, the Company's investment in these joint ventures totaled $9.4
million and $24.1 million, respectively, and is included in other assets. In
connection with certain of these investments, the Company has guaranteed a
minimum return on investment to its joint venture partners if certain annual
financial targets are not achieved. The Company records a liability for these
guarantees when payment is both probable and estimable.
27
<PAGE>
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. BASIS OF PRESENTATION AND ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK. The
carrying value of financial instruments reported in the balance sheet for
current assets and current liabilities approximates fair value. The carrying
values of notes receivable and senior bank facilities approximate fair value as
the floating rates inherent in the related financial instruments reflect changes
in overall market interest rates. The fair value of the senior subordinated
notes was approximately $215 million as of December 31, 1996, based on quoted
market values, compared to a carrying value of $200 million.
The Company's interest rate collar, which results in $250 million of the
Company's long-term debt being subject to an interest rate ceiling of 8.0% and
floor of 5.45%, has a fair value of approximately $(0.8) million and a carrying
value of zero. The Company may periodically use foreign currency forward and
option contracts to offset the effects of exchange rate fluctuations on cash
flows denominated in foreign currencies. The balance of these contracts at
December 31, 1996 is not material and the Company does not use derivative
financial instruments for trading or speculative purposes.
FOREIGN CURRENCY TRANSLATION. The financial position and results of
operations of the Company's foreign subsidiaries are measured using the local
currency as the functional currency. Assets and liabilities of these
subsidiaries are translated at the balance sheet date exchange rate and
statement of operations accounts are translated at the average rate prevailing
during the year. The following table reconciles the changes from period to
period:
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
--------------- -------------------------------------
AUG. 6, 1996 TO JAN. 1, 1996 TO
DEC. 31, 1996 AUG. 5, 1996 1995 1994
--------------- --------------- --------- ---------
<S> <C> <C> <C> <C>
Balance, beginning of period................. $ -- $ 5,200 $ 5,200 $ 8,700
Translation adjustment....................... 1,040 780 -- (3,500)
Income tax effect............................ -- -- -- --
------ ------ --------- ---------
Balance, end of period....................... $ 1,040 $ 5,980 $ 5,200 $ 5,200
------ ------ --------- ---------
------ ------ --------- ---------
</TABLE>
RECENTLY ISSUED ACCOUNTING STANDARDS. Statement of Financial Accounting
Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities," will become effective in 1997. The Company
does not believe its adoption will have a material impact on the Company's
financial statements.
3. INVENTORIES
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
---------- -----------
<S> <C> <C>
1996 1995
---------- -----------
Finished goods....................................................... $ 223,610 $ 262,930
Raw material......................................................... 216,250 206,820
Work in process...................................................... 86,440 90,190
---------- -----------
$ 526,300 $ 559,940
---------- -----------
---------- -----------
</TABLE>
Inventories are stated at the lower of cost or net realizable value, with
cost determined principally by use of the first-in, first-out method.
28
<PAGE>
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
---------- -----------
<S> <C> <C>
1996 1995
---------- -----------
Land and improvements................................................ $ 37,330 $ 26,970
Buildings............................................................ 206,380 321,090
Machinery and equipment.............................................. 113,250 398,320
---------- -----------
356,960 746,380
Less accumulated depreciation 7,630 262,280
---------- -----------
$ 349,330 $ 484,100
---------- -----------
---------- -----------
</TABLE>
The Company leases various facilities and equipment under non-cancelable
lease arrangements. Rent expense was $8.4 million for the period August 6, 1996
to December 31, 1996, $12.3 million for the period January 1, 1996 to August 5,
1996, and $21.5 and $19.2 million during 1995 and 1994, respectively.
At December 31, 1996, future minimum rental commitments for operating leases
with non-cancelable terms in excess of one year are as follows: 1997-$17.5
million; 1998-$14.1 million; 1999-$12.2 million; 2000-$9.1 million; 2001-$8.7
million; and thereafter-$11.4 million.
5. NOTES RECEIVABLE
The Company has notes receivable from certain of its customers. Generally,
these notes require periodic payments of principal and interest and are
collateralized by inventory and personal guarantees of the customers. These
notes bear interest based predominately on the prevailing prime rate.
Approximately $13.8 million of these notes are due from one customer at December
31, 1996. Although the Company does not currently foresee a material credit risk
associated with this receivable, repayment is dependent upon the financial
stability of this customer.
6. ACCRUED LIABILITIES
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
---------- -----------
<S> <C> <C>
1996 1995
---------- -----------
Salaries, wages and commissions...................................... $ 31,810 $ 25,930
Employee retirement plans............................................ 7,700 11,380
Interest............................................................. 13,720 --
Advertising and sales promotion...................................... 10,380 9,310
Insurance............................................................ 7,710 6,050
Warranty reserve..................................................... 2,500 --
Income taxes......................................................... 15,760 1,920
Property, payroll and other taxes.................................... 4,010 3,780
Restructuring........................................................ 27,950 --
Other................................................................ 31,590 28,930
---------- -----------
$ 153,130 $ 87,300
---------- -----------
---------- -----------
</TABLE>
29
<PAGE>
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. ACCRUED LIABILITIES (CONTINUED)
In connection with the acquisition, management has developed a restructuring
plan. The plan was finalized in December 1996 upon approval by the Company's
Board of Directors and implementation is expected to be completed in 1997. As
permitted by Emerging Issues Task Force ("EITF") Issue 95-3 "Recognition of
Liabilities in Connection with a Purchase Business Combination," the total cost
of the plan, which management estimates to be approximately $28.3 million, was
included as part of the purchase price allocation. The Company does not expect
any significant impact on its liquidity as a result of this plan.
The restructuring plan provides for severance costs associated with the
closure of various facilities, costs associated with the relocation of equipment
and office facilities and other closure related expenses.
7. RECEIVABLES FACILITY
In connection with the acquisition, the Company established a $175 million
Receivables Facility and formed LFI Receivables Corporation (the "Receivables
Subsidiary"), a special-purpose, bankruptcy remote subsidiary of the Company.
The Receivables Subsidiary purchases, on a revolving basis, substantially all
domestic trade receivables generated by the Company and FII at a 2.04% discount
from face. The Receivables Subsidiary transfers and assigns all its rights in
substantially all those receivables to the LFI Receivables Master Trust (the
"Master Trust").
A syndicate of banks and other financial institutions (the "Participants")
may purchase investor certificates representing fractional undivided senior
interests in the assets of the Master Trust ("Senior Investor Certificates").
The Receivables Subsidiary also retains an investment in the Master Trust equal
to the face value of receivables transferred to the Master Trust but not sold to
the Participants comprised of: i) a fractional, undivided senior interest in
trade receivables; and ii) a fractional, undivided subordinated interest in
trade receivables.
As of December 31, 1996, the outstanding balance of trade receivables
purchased by the Receivables Subsidiary and transferred to the Master Trust
amounted to $218 million. Of this amount, $167 million had been sold to the
Participants at face value through the issuance of Senior Investor Certificates.
The Receivables Subsidiary's retained investment in the Master Trust totaled $51
million, of which $5.0 million represented senior interests and $46.2 million
represented subordinated interests in the Master Trust. This investment is
carried at cost, which equals the face value of the underlying trade receivables
and approximates fair value.
The Senior Investor Certificates bear interest at LIBOR plus 1% and there is
a commitment fee of .5% per annum on the unused commitment under the facility.
The cost of this facility amounted to $4.4 million for the period August 6, 1996
to December 31, 1996, and is included in "Other, net" in the accompanying
Statement of Operations.
This arrangement places certain restrictions on the Company and the
Receivables Subsidiary, including placing liens on the Company's trade
receivables. At December 31, 1996, the Company was in compliance with these
covenants.
During February 1997, the Receivables Facility was replaced by a similar
facility under which the Master Trust may issue asset-backed certificates of up
to $200 million.
30
<PAGE>
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. LONG-TERM DEBT
As of December 31, the outstanding balances of long-term debt were as
follows:
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
1996 1995
---------- -----------
<S> <C> <C>
Revolving credit facility............................................ $ -- $ --
Tranche A term loan.................................................. 100,420 --
Tranche B term loan.................................................. 140,580 --
Senior subordinated notes............................................ 200,000 --
Other borrowings..................................................... 3,620 27,650
---------- -----------
444,620 27,650
Less current portion................................................. 18,970 25,500
---------- -----------
$ 425,650 $ 2,150
---------- -----------
---------- -----------
</TABLE>
The Company may periodically guarantee loans, leases or other credit
facilities for its customers and joint venture partners. At December 31, 1996,
the outstanding balance of these guarantees approximated $5.2 million. In
addition, the Company has guaranteed to certain joint venture partners a minimum
return on investment. Future guarantees under these arrangements aggregated
approximately $4.8 million at December 31, 1996.
At December 31, 1996, the maturities of long-term debt during each of the
next five years were approximately as follows: 1997-$19.0 million; 1998-$18.6
million; 1999-$16.9 million; 2000-$17.9 million; 2001-$27.7 million; and
thereafter $344.6 million.
In connection with the acquisition, the Company entered into loans under
senior bank facilities and issued senior subordinated notes, the net proceeds of
which were used to repay certain existing inter-company indebtedness of the
Predecessor to Masco.
SENIOR BANK FACILITIES. The Company entered into a credit agreement
providing for term loans of $300 million and a revolving credit facility of $150
million. The term loans consist of: (i) $125 million Tranche A bearing interest
at LIBOR plus 2.5% payable in quarterly installments through 2002; and (ii) $175
million Tranche B bearing interest at LIBOR plus 3.0% payable in quarterly
installments through 2004. The revolving credit facility is a 6 year facility
and bears interest at LIBOR plus 2.5%. The revolving credit facility requires a
commitment fee of .5% per annum on the unused portion of the facility. The
Company, at its option, may prepay the term loans or permanently reduce the
revolving credit facility.
At closing of the acquisition, borrowings under the senior bank facilities
totaled $300 million in term loans and $25 million under the revolving credit
facility. During the period ended December 31, 1996, all borrowings under the
revolving credit facility were repaid, and the term loans were prepaid in the
amount of $59 million.
The obligations under the senior bank facilities are unconditionally
guaranteed, jointly and severally, by FII and substantially all domestic
subsidiaries of the Company, and are collateralized by substantially all the
assets of the Company and the guarantors. The senior bank facilities contain
significant restrictive covenants including minimum interest coverage ratios,
maximum leverage ratios, annual capital expenditure limitations and net worth
requirements. At December 31, 1996, the Company was in compliance with these
covenants.
31
<PAGE>
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. LONG-TERM DEBT (CONTINUED)
SENIOR SUBORDINATED NOTES. In connection with the acquisition, the Company
issued, in a private placement, $200 million unsecured senior subordinated notes
maturing August 1, 2006 ("Notes"). Interest on the Notes is payable semiannually
at 10 7/8% per annum commencing on February 1, 1997. On November 8, 1996, the
Company's registration statement on Form S-4 (No. 333-11905) became effective
under the Securities Act of 1933, providing for the exchange of the Notes for
new Notes. All old Notes were exchanged for new Notes on December 13, 1996. The
new Notes are identical in all material respects to the Notes issued through the
private placement except that they are registered under the Securities Act, thus
allowing, subject to certain limitations, transfer pursuant to the Securities
Act.
The Notes may be redeemed by the Company subsequent to August 1, 2001 at
premiums which begin at 5.438% and decline each year to face for redemptions
taking place after August 1, 2004. In addition, at any time prior to August 1,
1999, the Company may redeem up to 33 1/3% of the original aggregate principal
amount of the Notes with the proceeds of one or more public equity offerings at
a redemption price of 110.875%. Also, upon a qualifying change of control, the
Notes may be redeemed at the option of the Company at the Applicable Premium (as
defined), or in certain instances at the option of the Note holders at a premium
of 1%. The Notes contain certain restrictive covenants which, among others,
limit the incurrence of additional indebtedness and restrict capital
transactions, distributions, and asset dispositions of certain subsidiaries. At
December 31, 1996, the Company was in compliance with these covenants.
In connection with the Note offering, the Company's domestic operating
subsidiaries (the "Guarantor Subsidiaries") fully and unconditionally guarantee
the Company's performance under the Notes on a joint and several basis (see Note
16 Guarantor Financial Statements).
9. EMPLOYEE RETIREMENT PLANS
The Company sponsors qualified defined benefit and defined contribution
retirement plans for most of its employees. The Company also maintains a
non-qualified, defined benefit retirement plan for certain key executives. The
Company's funding policy with respect to the qualified defined benefit plans is
to contribute amounts to the plan sufficient to meet minimum funding
requirements as set by law. The non-qualified plan is unfunded. The Company's
defined contribution plans, available to most domestic employees, contain a
savings provision that permits pre-tax employee contributions and, at certain
locations, a limited employer match. Aggregate charges to income under these
plans were $4.4 million for the period August 6, 1996 to December 31, 1996, $4.0
million for the period January 1, 1996 to August 5, 1996, and $7.1 million and
$5.8 million during 1995 and 1994, respectively.
Net periodic pension cost for the Company's pension plans includes the
following components:
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
------------- ---------------------------------------
<S> <C> <C> <C> <C>
JAN. 1,
1996 JAN. 1, 1995 JAN. 1, 1994
AUG., 6 1996 TO TO TO
TO AUG. 5, DEC. 31, DEC. 31,
DEC. 31, 1996 1996 1995 1994
------------- ----------- ------------ ------------
Service cost-benefits earned during the year............. $ 2,630 $ 4,480 $ 6,080 $ 6,980
Interest cost on projected benefit obligation............ 5,430 7,550 12,010 11,280
Actual return on assets.................................. (1,690) (8,410) (16,540) 5,870
Net amortization and deferral............................ (3,750) 970 3,540 (22,550)
------ ----------- ------------ ------------
Net periodic pension cost................................ $ 2,620 $ 4,590 $ 5,090 $ 1,580
------ ----------- ------------ ------------
------ ----------- ------------ ------------
</TABLE>
32
<PAGE>
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. EMPLOYEE RETIREMENT PLANS (CONTINUED)
Major assumptions used in accounting for the Company's pension plans are as
follows:
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
--------------- --------------------
<S> <C> <C> <C>
1996 1995 1994
--------------- --------- ---------
Discount rate for obligations................................................ 7.50%-7.75% 7.25% 8.5%
Rate of increase in compensation levels...................................... 5.0% 5.0% 5.0%
Expected long-term rate of return on plan assets............................. 10.0% 11.0% 12.0%
</TABLE>
The funded status of the Company's pension plans at December 31 is
summarized as follows:
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
------------ --------------------------
<S> <C> <C> <C>
1996 1995
------------ --------------------------
<CAPTION>
ACCUMULATED ASSETS ACCUMULATED
BENEFITS EXCEED BENEFITS
EXCEED ACCUMULATED EXCEED
ASSETS BENEFITS ASSETS
------------ ------------ ------------
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation............................................. $ 150,770 $ 19,560 $ 126,660
------------ ------------ ------------
------------ ------------ ------------
Accumulated benefit obligation.......................................... $ 153,360 $ 20,090 $ 130,040
------------ ------------ ------------
------------ ------------ ------------
Projected benefit obligation............................................ $ 184,940 $ 20,870 $ 159,810
Assets at fair value.................................................... 134,820 20,640 114,350
------------ ------------ ------------
Projected benefit obligation in excess of plan assets................... (50,120) (230) (45,460)
Reconciling items:
Unrecognized net loss (gain).......................................... 22,340 3,970 33,980
Unrecognized prior service cost....................................... 360 330 13,870
Unrecognized net (asset) obligation at transition..................... (1,310) (1,540) (7,830)
Requirement to recognize minimum liability............................ (4,720) -- (10,250)
------------ ------------ ------------
(Accrued)/prepaid pension cost.......................................... $ (33,450) $ 2,530 $ (15,690)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
33
<PAGE>
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL CURRENCY TOTAL
COMMON PAID-IN RETAINED TRANSLATION SHAREHOLDER'S
STOCK CAPITAL EARNINGS ADJUSTMENT EQUITY
--------- ---------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at August 5, 1996........................... $ -- $ -- $ -- $ -- $ --
Contribution of businesses from FII................. -- 421,050 -- -- 421,050
Net income.......................................... -- -- 31,270 -- 31,270
Foreign exchange.................................... -- -- -- 1,040 1,040
--------- ---------- --------- ----------- -------------
Balance at December 31, 1996........................ $ -- $ 421,050 $ 31,270 $ 1,040 $ 453,360
--------- ---------- --------- ----------- -------------
--------- ---------- --------- ----------- -------------
</TABLE>
11. MASCO CORPORATION NET INVESTMENT AND ADVANCES TO PREDECESSOR
<TABLE>
<CAPTION>
PREDECESSOR
--------------------------
<S> <C> <C>
DEC. 31, DEC. 31,
1995 1994
------------ ------------
Balance, beginning of period..................................... $1,633,110 $1,557,600
Net income (loss)................................................ (16,240) (23,770)
Additional net investment and advances........................... 4,170 99,280
------------ ------------
Balance, end of period........................................... $1,621,040 $1,633,110
------------ ------------
------------ ------------
</TABLE>
Investment and advances of the Predecessor reflect the accumulation of
transactions between the Group and Masco. These transactions include operating
results, management fees, advances and other intercompany transactions.
Interest on funds advanced by Masco was charged to the Group based on
interest rates which approximated the bank prime rate, adjusted monthly. Such
interest rates approximated 8.8% and 7.1% percent in 1995 and 1994,
respectively. The outstanding balance of funds advanced by Masco, including
accrued interest, at December 31, 1995 and 1994 approximated $1,195.0 million
and $1,192.0 million, respectively.
34
<PAGE>
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
12. INCOME TAXES
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
-------------- ------------------------------------
AUG. 6, 1996 JAN. 1, 1996 DECEMBER 31,
TO TO ---------------------
DEC. 31, 1996 AUG. 5, 1996 1995 1994
-------------- ------------- --------- ----------
<S> <C> <C> <C> <C>
Income (loss) before income taxes:
Domestic................................................ $ 48,640 $ (350) $ (9,410) $ (35,020)
Foreign................................................. (530) (810) 150 17,300
------- ------------- --------- ----------
$ 48,110 $ (1,160) $ (9,260) $ (17,720)
------- ------------- --------- ----------
------- ------------- --------- ----------
Provision (credit) for income taxes:
Currently payable:
Federal--U.S. income (losses)......................... $ 16,240 $ 3,680 $ (4,820) $ (7,060)
--Certain foreign earnings...................... 1,640 2,510 3,030 10,640
State and local....................................... 3,840 1,950 3,200 5,050
Foreign............................................... 1,010 1,300 1,010 680
Deferred:
Federal............................................... (5,890) (2,600) 4,560 (3,290)
Foreign............................................... -- (10) -- 30
------- ------------- --------- ----------
$ 16,840 $ 6,830 $ 6,980 $ 6,050
------- ------------- --------- ----------
------- ------------- --------- ----------
</TABLE>
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
------------ ------------
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Deferred tax assets:
Inventories...................................................................... $ 7,830 $ 6,670
Accrued liabilities.............................................................. 37,260 10,710
Alternative minimum tax.......................................................... -- 860
------------ ------------
Gross deferred tax assets:........................................................... 45,090 18,240
------------ ------------
Deferred tax liabilities:
Property and equipment........................................................... 23,560 69,220
Other............................................................................ 1,280 1,280
------------ ------------
Gross deferred tax liabilities................................................. 24,840 70,500
------------ ------------
Net deferred tax asset (liability) before valuation allowance:....................... 20,250 (52,260)
------------ ------------
Valuation allowance.................................................................. (8,390) --
------------ ------------
Net deferred tax asset (liability):.................................................. $ 11,860 $ (52,260)
------------ ------------
------------ ------------
</TABLE>
35
<PAGE>
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
12. INCOME TAXES (CONTINUED)
The following is a reconciliation of tax computed at the U.S. federal
statutory rate to the provision for income taxes allocated to income (loss)
before income taxes:
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
-------------- -------------------------------------
AUG. 6, 1996 DECEMBER 31,
TO JAN. 1, 1996 TO --------------------
DEC. 31, 1996 AUG. 5, 1996 1995 1994
-------------- --------------- --------- ---------
<S> <C> <C> <C> <C>
U.S. federal statutory rate.................................. 35% 35% 35% 35%
Tax (credit) at U.S. federal statutory rate.................. $ 16,840 $ (410) $ (3,240) $ (6,200)
Higher taxes on foreign earnings............................. 2,870 4,080 4,050 5,330
Amortization in excess of tax................................ 140 2,620 4,460 4,450
State and local taxes, net of federal tax benefit............ 1,820 1,270 2,080 3,280
Reduction from tax sharing agreement......................... (4,970) -- -- --
Other........................................................ 140 (730) (370) (810)
------- ------ --------- ---------
Income taxes............................................. $ 16,840 $ 6,830 $ 6,980 $ 6,050
------- ------ --------- ---------
------- ------ --------- ---------
</TABLE>
The Company is included in the consolidated federal tax return of FII.
Pursuant to the Company's tax sharing agreement with FII, the Company will be
required to make tax sharing payments to FII with respect to the Company's pro
rata share of consolidated federal and combined state and local income tax
liabilities.
Under Statement of Financial Accounting Standards No. 109, deferred income
taxes are provided to recognize the effect of temporary differences between
financial reporting and income tax reporting. Realization of deferred tax assets
is dependent upon the ability to carryback reversing deductible temporary
differences to offset actual taxable income in the carryback period or to offset
taxable temporary differences as scheduled reversals are projected to occur.
Management has established a partial valuation allowance relating to deferred
tax assets which will reverse in periods in which realization is not assured.
The Predecessor was included in the consolidated federal and state tax
returns of Masco. Accordingly, substantially all income tax-related assets and
liabilities were due to or from Masco. Income taxes and credits were computed on
a separate return basis.
13. RELATED PARTY TRANSACTIONS
As part of the Acquisition, FII and the Company entered into a Management
Agreement pursuant to which FII provides to the Company executive management,
corporate support, administrative, data processing, human resources, legal,
environmental, audit, treasury, tax and other management-related services. The
Company compensates FII in an amount equal to FII's actual cost of providing
such services. Those costs approximated $6.6 million for the period August 6,
1996 to December 31, 1996, of which approximately $1.5 million was included in
accrued liabilities at December 31, 1996.
The Company sells furniture and accessories to certain distribution
businesses owned by FII. For the period August 6, 1996 to December 31, 1996, the
Company's sales to FII were $21.2 million. At December 31, 1996, the Company had
accounts receivable totaling $13.6 million as a result of these sales
transactions.
36
<PAGE>
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
14. ENVIRONMENTAL REGULATIONS
In the ordinary course of business, the Company may become exposed to
potential liabilities resulting from spills and releases of hazardous materials
at its manufacturing facilities. The Company also has been named as a
potentially responsible party at a total of seven non-owned contaminated sites,
including Superfund sites. The Company does not believe that the costs related
to these sites or those costs associated with investigating or remediating these
releases will have a material adverse effect on the Company's financial
condition, cash flows, operating expenses or earnings. Furthermore, Masco has
agreed to indemnify the Company for certain liabilities in excess of specified
amounts relating to the existence of hazardous substances at certain of the
Company's manufacturing facilities. Actual resolution of these matters, however,
could differ from management's estimates and assumptions.
15. GEOGRAPHIC INFORMATION
The Company is engaged principally in one line of business -- the
manufacture and sale of home furnishings products including quality furniture,
fabrics and other home furnishings.
The following tables present information about the Company by geographic
area:
<TABLE>
<CAPTION>
NET SALES (1)
------------------------------------------------------
<S> <C> <C> <C> <C>
COMPANY
------------ PREDECESSOR
AUG. 6, 1996 ----------------------------------------
TO JAN. 1, 1996
DEC. 31, TO
1996 AUG. 5, 1996 1995 1994
------------ ------------ ------------ ------------
United States............................................ $ 769,000 $ 1,030,000 $ 1,761,000 $ 1,673,000
Pacific Rim.............................................. 58,000 76,000 141,000 126,000
European Union and other foreign countries............... 30,000 42,000 91,000 98,000
------------ ------------ ------------ ------------
Total............................................ $ 857,000 $ 1,148,000 $ 1,993,000 $ 1,897,000
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
OPERATING PROFIT (LOSS)
------------------------------------------------------
<S> <C> <C> <C> <C>
COMPANY
------------ PREDECESSOR
AUG. 6, 1996 ----------------------------------------
TO JAN. 1, 1996
DEC. 31, TO
1996 AUG. 5, 1996 1995 1994
------------ ------------ ------------ ------------
United States............................................ $ 67,000 $ 55,000 $ 91,000 $ 72,000
Pacific Rim.............................................. 13,000 12,000 22,000 22,000
European Union and other foreign countries............... 1,000 (3,000) (3,000) (5,000)
------------ ------------ ------------ ------------
Total............................................ 81,000 64,000 110,000 89,000
------------ ------------ ------------ ------------
Other expense, net....................................... (27,000) (56,000) (103,000) (94,000)
General corporate expense................................ (6,000) (9,000) (16,000) (13,000)
------------ ------------ ------------ ------------
Income (loss) before income taxes.................... $ 48,000 $ (1,000) $ (9,000) $ (18,000)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
37
<PAGE>
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
15. GEOGRAPHIC INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
ASSETS AT DECEMBER 31
--------------------------
<S> <C> <C>
COMPANY PREDECESSOR
------------ ------------
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
United States..................................................... $ 921,000 $ 1,606,000
Pacific Rim....................................................... 212,000 243,000
European Union and other foreign countries........................ 58,000 55,000
------------ ------------
Total..................................................... $ 1,191,000 $ 1,904,000
------------ ------------
------------ ------------
</TABLE>
(1) After elimination of intracompany sales between geographic areas of:
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY ---------------------------------
------------ JAN. 1,
AUG. 6, 1996 1996
TO TO
DEC. 31, AUG. 5,
1996 1996 1995 1994
------------ ----------- --------- ---------
<S> <C> <C> <C> <C>
United States................................................... $ 6,000 $ 5,000 $ 12,000 $ 13,000
Pacific Rim..................................................... 112,000 144,000 289,000 267,000
European Union and other foreign countries...................... -- -- 1,000 1,000
</TABLE>
16. GUARANTOR FINANCIAL STATEMENTS
In connection with the issuance of the Senior Subordinated Notes, the
Guarantor Subsidiaries fully and unconditionally guaranteed the Company's
performance under the Notes on a joint and several basis. The Guarantor
Subsidiaries are direct or indirect wholly-owned subsidiaries of the Company.
The remaining subsidiaries are direct or indirect subsidiaries of the Guarantor
Subsidiaries. There are no restrictions under the Company's financing
arrangements on the ability of the Guarantor Subsidiaries to distribute funds to
the Company in the form of cash dividends, loans or advances. The following
combined financial data provides information regarding the financial position,
results of operations and cash flows of the Guarantor Subsidiaries (condensed
consolidated/combined financial data). Separate financial statements and other
disclosures concerning the Guarantor Subsidiaries are not presented because
management has determined that such information would not be material to the
holders of the Notes.
For purposes of the consolidated financial data, the Guarantor Subsidiaries
include substantially all domestic subsidiaries of the Company (other than the
Receivables Subsidiary and certain subsidiaries with substantially no assets or
operations). The Guarantor Subsidiaries account for their investments in the
non-guarantor subsidiaries on the equity method. The Company also accounts for
its investments in the Guarantor Subsidiaries and the Receivables Subsidiary on
the equity method. The principal elimination entries are to eliminate the
investments in subsidiaries and intercompany balances and transactions.
38
<PAGE>
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
16. GUARANTOR FINANCIAL STATEMENTS (CONTINUED)
COMPANY
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash investments................. $ -- $ 4,510 $ 17,890 $ -- $ 22,400
Trade receivables......................... -- 17,060 64,750 -- 81,810
Other receivables......................... -- 24,070 22,210 -- 46,280
Investment in Receivables Trust........... -- -- 51,120 -- 51,120
Prepaid expenses.......................... -- 15,100 7,590 -- 22,690
Inventories............................... -- 431,910 94,390 -- 526,300
Deferred income taxes..................... -- 11,440 2,640 -- 14,080
Intercompany account...................... -- 245,140 12,500 (257,640) --
---------- ------------ ----------- ------------ ------------
Total current assets.................. -- 749,230 273,090 (257,640) 764,680
Property and equipment, net................... -- 265,190 84,140 -- 349,330
Notes receivable.............................. -- 7,620 -- -- 7,620
Other assets.................................. -- 55,430 13,670 -- 69,100
Investments in affiliates..................... 453,360 44,790 -- (498,150) --
---------- ------------ ----------- ------------ ------------
Total assets.......................... $ 453,360 $ 1,122,260 $ 370,900 $ (755,790) $1,190,730
---------- ------------ ----------- ------------ ------------
---------- ------------ ----------- ------------ ------------
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Notes payable............................. $ -- $ 17,350 $ 1,620 $ -- $ 18,970
Accounts payable.......................... -- 71,230 21,800 -- 93,030
Accrued liabilities....................... -- 109,950 43,180 -- 153,130
Intercompany account...................... -- 12,500 245,140 (257,640) --
---------- ------------ ----------- ------------ ------------
Total current liabilities............. -- 211,030 311,740 (257,640) 265,130
Long-term debt................................ -- 424,430 1,220 -- 425,650
Other long-term liabilities................... -- 35,670 10,920 -- 46,590
---------- ------------ ----------- ------------ ------------
Total liabilities..................... -- 671,130 323,880 (257,640) 737,370
Shareholder's equity.......................... 453,360 451,130 47,020 (498,150) 453,360
---------- ------------ ----------- ------------ ------------
Total liabilities and shareholder's
equity.............................. $ 453,360 $ 1,122,260 $ 370,900 $ (755,790) $1,190,730
---------- ------------ ----------- ------------ ------------
---------- ------------ ----------- ------------ ------------
</TABLE>
39
<PAGE>
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
16. GUARANTOR FINANCIAL STATEMENTS (CONTINUED)
PREDECESSOR
CONDENSED COMBINING BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED
------------ -------------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash investments............................ $ 4,540 $ 12,770 $ -- $ 17,310
Receivables.......................................... 253,940 73,390 (1,910) 325,420
Inventories.......................................... 429,880 130,060 -- 559,940
Prepaid expenses..................................... 14,340 12,030 -- 26,370
Deferred income taxes................................ 17,000 -- -- 17,000
Company account...................................... 161,420 21,980 (183,400) --
------------ -------------- ------------ ------------
Total current assets............................. 881,120 250,230 (185,310) 946,040
------------ -------------- ------------ ------------
Property and equipment, net............................ 373,370 110,730 -- 484,100
Excess of cost over acquired net assets................ 394,100 8,180 -- 402,280
Notes receivable....................................... 4,540 26,470 -- 31,010
Investments in affiliates.............................. 394,720 -- (394,720) --
Other assets........................................... 23,670 22,210 (5,400) 40,480
------------ -------------- ------------ ------------
Total assets..................................... $ 2,071,520 $ 417,820 $ (585,430) $ 1,903,910
------------ -------------- ------------ ------------
------------ -------------- ------------ ------------
LIABILITIES AND MASCO NET INVESTMENT AND ADVANCES
Current Liabilities:
Notes payable........................................ $ 220 $ 25,280 $ -- $ 25,500
Accounts payable..................................... 67,540 26,690 (1,880) 92,350
Accrued liabilities.................................. 64,070 23,230 -- 87,300
Intercompany account................................. 21,980 161,420 (183,400) --
------------ -------------- ------------ ------------
Total current liabilities........................ 153,810 236,620 (185,280) 205,150
------------ -------------- ------------ ------------
Long-term debt......................................... 1,910 240 -- 2,150
Deferred income taxes and other........................ 69,350 6,220 -- 75,570
------------ -------------- ------------ ------------
Total liabilities................................ 225,070 243,080 (185,280) 282,870
------------ -------------- ------------ ------------
Masco net investment and advances...................... 1,846,450 174,740 (400,150) 1,621,040
------------ -------------- ------------ ------------
Total liabilities and Masco net investment and
advances....................................... $ 2,071,520 $ 417,820 $ (585,430) $ 1,903,910
------------ -------------- ------------ ------------
------------ -------------- ------------ ------------
</TABLE>
40
<PAGE>
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
16. GUARANTOR FINANCIAL STATEMENTS (CONTINUED)
COMPANY
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE PERIOD AUGUST 6, 1996 TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- -------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales................................... $ -- $ 774,540 $ 200,490 $ (117,540) $ 857,490
Cost of sales............................... -- 590,190 165,490 (117,540) 638,140
----------- -------------- ----------- ------------ ------------
Gross profit.............................. -- 184,350 35,000 -- 219,350
Selling, general and administrative
expenses.................................. -- 123,850 20,730 -- 144,580
----------- -------------- ----------- ------------ ------------
Operating profit.......................... -- 60,500 14,270 -- 74,770
Other expense, net.......................... (31,270) 16,880 8,650 32,400 26,660
----------- -------------- ----------- ------------ ------------
Income (loss) before income taxes......... 31,270 43,620 5,620 (32,400) 48,110
Income taxes................................ -- 14,580 2,260 -- 16,840
----------- -------------- ----------- ------------ ------------
Net income (loss)......................... $ 31,270 $ 29,040 $ 3,360 $ (32,400) $ 31,270
----------- -------------- ----------- ------------ ------------
----------- -------------- ----------- ------------ ------------
</TABLE>
41
<PAGE>
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
16. GUARANTOR FINANCIAL STATEMENTS (CONTINUED)
PREDECESSOR
CONDENSED COMBINING STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD JANUARY 1, 1996 TO AUGUST 5, 1996
-----------------------------------------------------
<S> <C> <C> <C> <C>
NON-
GUARANTOR GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED
------------ ----------- ------------ ------------
Net sales................................................. $ 1,014,270 $ 294,360 $ (160,740) $ 1,147,890
Cost of sales............................................. 780,000 251,390 (160,740) 870,650
------------ ----------- ------------ ------------
Gross profit............................................ 234,270 42,970 -- 277,240
Selling, general and administrative expenses.............. 182,510 39,720 -- 222,230
------------ ----------- ------------ ------------
Operating profit........................................ 51,760 3,250 -- 55,010
Other expense, net........................................ 44,570 9,280 2,320 56,170
------------ ----------- ------------ ------------
Income (loss) before income taxes....................... 7,190 (6,030) (2,320) (1,160)
Income taxes (credit)..................................... 8,910 (2,080) -- 6,830
------------ ----------- ------------ ------------
Net income (loss)....................................... $ (1,720) $ (3,950) $ (2,320) $ (7,990)
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD JANUARY 1, 1995 TO DECEMBER 31, 1995
-----------------------------------------------------
<S> <C> <C> <C> <C>
NON-
GUARANTOR GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED
------------ ----------- ------------ ------------
Net sales................................................. $ 1,728,250 $ 580,000 $ (315,640) $ 1,992,610
Cost of sales............................................. 1,317,550 486,500 (303,060) 1,500,990
------------ ----------- ------------ ------------
Gross profit............................................ 410,700 93,500 (12,580) 491,620
Selling, general and administrative expenses.............. 313,260 97,380 (12,850) 397,790
------------ ----------- ------------ ------------
Operating profit........................................ 97,440 (3,880) 270 93,830
Other expense, net........................................ 65,000 23,680 14,410 103,090
------------ ----------- ------------ ------------
Income (loss) before income taxes....................... 32,440 (27,560) (14,140) (9,260)
Income taxes (credit)..................................... 16,170 (9,190) -- 6,980
------------ ----------- ------------ ------------
Net income (loss)....................................... $ 16,270 $ (18,370) $ (14,140) $ (16,240)
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD JANUARY 1, 1994 TO DECEMBER 31, 1994
-----------------------------------------------------
<S> <C> <C> <C> <C>
NON-
GUARANTOR GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED
------------ ----------- ------------ ------------
Net sales................................................. $ 1,640,060 $ 551,740 $ (294,320) $ 1,897,480
Cost of sales............................................. 1,256,440 462,800 (285,210) 1,434,030
------------ ----------- ------------ ------------
Gross profit............................................ 383,620 88,940 (9,110) 463,450
Selling, general and administrative expenses.............. 301,020 95,410 (9,630) 386,800
------------ ----------- ------------ ------------
Operating profit........................................ 82,600 (6,470) 520 76,650
Other expense, net........................................ 58,170 16,230 19,970 94,370
------------ ----------- ------------ ------------
Income (loss) before income taxes....................... 24,430 (22,700) (19,450) (17,720)
Income taxes (credit)..................................... 15,940 (9,890) -- 6,050
------------ ----------- ------------ ------------
Net income (loss)....................................... $ 8,490 $ (12,810) $ (19,450) $ (23,770)
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
</TABLE>
42
<PAGE>
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
16. GUARANTOR FINANCIAL STATEMENTS (CONTINUED)
COMPANY
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE PERIOD AUGUST 6, 1996 TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES:... $ -- $ 128,940 $ (23,160) $ -- $ 105,780
----------- ----------- -------------- ------ ------------
INVESTING ACTIVITIES:
Acquisition of businesses, net of cash
acquired................................. -- (645,430) -- -- (645,430)
Investments in Receivables Trust........... -- -- (51,120) -- (51,120)
Capital expenditures....................... -- (11,250) (2,570) -- (13,820)
Collection of note receivable.............. -- 1,670 -- -- 1,670
Other, net................................. -- 3,200 -- -- 3,200
----------- ----------- -------------- ------ ------------
Net cash (used for) investing
activities........................... -- (651,810) (53,690) -- (705,500)
----------- ----------- -------------- ------ ------------
FINANCING ACTIVITIES:
Proceeds from long-term debt............... -- 525,000 -- -- 525,000
Net proceeds from sale of account
receivable............................... -- -- 167,000 -- 167,000
Capital contribution....................... -- 76,400 -- -- 76,400
Deferred financing costs................... -- (37,590) -- -- (37,590)
Net repayments of long-term debt........... -- (85,350) (23,340) -- (108,690)
Intercompany accounts, net................. -- 48,920 (48,920) -- --
----------- ----------- -------------- ------ ------------
Net cash provided by (used for)
financing activities............... -- 527,380 94,740 -- 622,120
----------- ----------- -------------- ------ ------------
CASH AND CASH INVESTMENTS:
Increase (decrease) for the period........... -- 4,510 17,890 -- 22,400
Balance, beginning of period................. -- -- -- -- --
----------- ----------- -------------- ------ ------------
Balance, end of period....................... $ -- $ 4,510 $ 17,890 $ -- $ 22,400
----------- ----------- -------------- ------ ------------
----------- ----------- -------------- ------ ------------
</TABLE>
43
<PAGE>
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
16. GUARANTOR FINANCIAL STATEMENTS (CONTINUED)
PREDECESSOR
CONDENSED COMBINING STATEMENTS OF CASH FLOWS
FOR THE PERIOD JANUARY 1, 1996 TO AUGUST 5, 1996
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED
----------- -------------- ------------ -----------
<S> <C> <C> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES:................ $ 21,890 $ 20,110 $ (2,350) $ 39,650
----------- ------- ------------ -----------
INVESTING ACTIVITIES:
Capital expenditures.................................... (14,130) (2,390) -- (16,520)
Collection of notes receivable, net..................... 1,450 1,340 -- 2,790
Other, net.............................................. (4,530) 7,290 (5,400) (2,640)
----------- ------- ------------ -----------
Net cash (used for) provided by investing
activities........................................ (17,210) 6,240 (5,400) (16,370)
----------- ------- ------------ -----------
FINANCING ACTIVITIES:
(Decrease) in Masco investment and advances............. (4,900) (25,450) 7,750 (22,600)
Proceeds from long-term debt............................ 800 86,960 -- 87,760
Net repayments of short-term debt....................... (800) (86,290) -- (87,090)
----------- ------- ------------ -----------
Net cash (used for) financing activities............ (4,900) (24,780) 7,750 (21,930)
----------- ------- ------------ -----------
CASH AND CASH INVESTMENTS:
(Decrease) Increase for the period........................ (220) 1,570 -- 1,350
Balance, beginning of period.............................. 4,540 12,770 -- 17,310
----------- ------- ------------ -----------
Balance, end of period.................................... $ 4,320 $ 14,340 $ -- $ 18,660
----------- ------- ------------ -----------
----------- ------- ------------ -----------
</TABLE>
44
<PAGE>
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
16. GUARANTOR FINANCIAL STATEMENTS (CONTINUED)
PREDECESSOR
CONDENSED COMBINING STATEMENTS OF CASH FLOWS
FOR THE PERIOD JANUARY 1, 1995 TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED
----------- -------------- ------------ -----------
<S> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES:..... $ 87,030 $ (38,600) $ (14,110) $ 34,320
----------- -------------- ------------ -----------
INVESTING ACTIVITIES:
Capital expenditures.................................... (42,550) (18,480) -- (61,030)
Issuance of notes receivable............................ (1,480) (8,780) -- (10,260)
Collection of notes receivable, net..................... 3,000 2,020 -- 5,020
Other, net.............................................. (4,600) (1,070) 14,460 8,790
----------- -------------- ------------ -----------
Net cash (used for) investing activities............ (45,630) (26,310) 14,460 (57,480)
----------- -------------- ------------ -----------
FINANCING ACTIVITIES:
Decrease (Increase) in Masco Corp. investment and
advances.............................................. (41,530) 45,160 (350) 3,280
Increase in other debt.................................. 120 16,080 -- 16,200
Payment of other debt................................... (2,290) (1,430) -- (3,720)
----------- -------------- ------------ -----------
Net cash (used for) provided by financing
activities........................................ (43,700) 59,810 (350) 15,760
----------- -------------- ------------ -----------
CASH AND CASH INVESTMENTS:
(Decrease) for the year................................... (2,300) (5,100) -- (7,400)
Balance, beginning of period.............................. 6,840 17,870 -- 24,710
----------- -------------- ------------ -----------
Balance, end of period.................................... $ 4,540 $ 12,770 $ -- $ 17,310
----------- -------------- ------------ -----------
----------- -------------- ------------ -----------
</TABLE>
45
<PAGE>
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
16. GUARANTOR FINANCIAL STATEMENTS (CONTINUED)
PREDECESSOR
CONDENSED COMBINING STATEMENTS OF CASH FLOWS
FOR THE PERIOD JANUARY 1, 1994 TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED
----------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES:..... $ 33,900 $ (15,130) $ (19,450) $ (680)
----------- -------------- ------------ ----------
INVESTING ACTIVITIES:
Capital expenditures.................................... (57,140) (11,650) -- (68,790)
Issuance of notes receivable............................ -- (1,000) -- (1,000)
Collection of notes receivable, net..................... 3,130 580 -- 3,710
Other, net.............................................. (15,340) 11,380 16,930 12,970
----------- -------------- ------------ ----------
Net cash provided by (used for) investing activities (69,350) (690) 16,930 (53,110)
----------- -------------- ------------ ----------
FINANCING ACTIVITIES:
Increase in Masco Corp. investment and advances......... 73,110 24,200 2,520 99,830
Increase in other debt.................................. -- 5,360 -- 5,360
Payment of other debt................................... (34,720) (17,370) -- (52,090)
----------- -------------- ------------ ----------
Net cash provided by financing activities........... 38,390 12,190 2,520 53,100
----------- -------------- ------------ ----------
CASH AND CASH INVESTMENTS:
Increase (decrease) for the year.......................... 2,940 (3,630) -- (690)
Balance, beginning of period.............................. 3,900 21,500 -- 25,400
----------- -------------- ------------ ----------
Balance, end of period.................................... $ 6,840 $ 17,870 $ -- $ 24,710
----------- -------------- ------------ ----------
----------- -------------- ------------ ----------
</TABLE>
46
<PAGE>
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
17. PRO FORMA SUPPLEMENTARY DATA (UNAUDITED)
The following pro forma supplementary data for the years ended December 31,
1996 and 1995 give effect to the acquisition transactions as if they had
occurred on January 1, 1995. The pro forma supplementary data is provided for
informational purposes only and should not be construed to be indicative of the
Company's results of operations had the transactions been consummated on the
dates assumed and do not project the Company's results of operations for any
future date. (See Notes 1 The Acquisition and 2 Basis of Presentation and
Accounting Policies)
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------
<S> <C> <C>
DEC. 31, DEC. 31,
1996 1995
------------ ------------
Net sales........................................................ $ 2,005.4 $ 1,975.1
Gross profit..................................................... 502.0 496.5
Operating profit................................................. 147.9 125.2
Net income....................................................... 48.4 28.3
</TABLE>
The primary adjustments applied to the historical predecessor financial
statements to arrive at the pro forma presentation include the following:
a) Adjustment to reflect elimination of goodwill amortization of approximately
$14.2 million on an annualized basis.
b) Adjustment of approximately $15.9 million on an annual basis to reflect
decreased depreciation for writedown of property and equipment from the
allocation of the estimated fair value of the net assets.
c) Adjustment to reflect the reduction of interest expense due to the
elimination of interest expense on Masco net advances offset by the impact
of interest expense on the financing arrangements incurred at the
acquisition.
d) Adjustment to eliminate the operating results of businesses acquired by FII
from Masco but not contributed to the Company.
47
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not Applicable
48
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required to be presented in this Item 10 will be contained in an
amendment to this Form 10-K to be filed not later than 120 days after the end of
the fiscal year covered by this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required to be presented in this Item 11 will be contained in an
amendment to this Form 10-K to be filed not later than 120 days after the end of
the fiscal year covered by this Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required to be presented in this Item 12 will be contained in an
amendment to this Form 10-K to be filed not later than 120 days after the end of
the fiscal year covered by this Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required to be presented in this Item 13 will be contained in an
amendment to this Form 10-K to be filed not later than 120 days after the end of
the fiscal year covered by this Form 10-K.
49
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ----------- ---------------------------------------------------------------------------------------------------------
<C> <S>
3.1 Certificate of Incorporation of LIFESTYLE FURNISHINGS INTERNATIONAL LTD. (the "Company")(Incorporated by
reference to Exhibit 3.1 to the Company's Registration Statement on Form S-4 (No. 333-11905))
3.2 By-Laws of the Company (Incorporated by reference to Exhibit 3.25 to the Company's Registration Statement
on Form S-4 (No. 333-11905))
4.1 Indenture between the Company and IBJ Schroder Bank & Trust Company, as Trustee, dated August 5, 1996
(Incorporated by reference to Exhibit 4 to the Company's Registration Statement on Form S-4 (No.
333-11905))
4.2 Supplemental Indenture dated December 20, 1996*
10.1 Acquisition Agreement between FURNISHINGS INTERNATIONAL INC. and Masco Corporation
dated as of March 29, 1996 (Incorporated by reference to Exhibit 10.1 to the
Company's Registration Statement on Form S-4 (No. 333-11905))
10.2 Amendment No. 1 to Acquisition Agreement dated as of June 21, 1996 (Incorporated by
reference to Exhibit 10.2 to the Company's Registration Statement on Form S-4 (No.
333-11905))
10.3 Amendment No. 2 to Acquisition Agreement dated as of August 5, 1996 (Incorporated by
reference to Exhibit 10.3 to the Company's Registration Statement on Form S-4 (No.
333-11905))
10.4 Credit Agreement dated as of August 5, 1996 among FURNISHINGS INTERNATIONAL INC.,
the Company, the subsidiary borrowers named therein, the lenders named therein and
The Chase Manhattan Bank, as Swingline Lender, Administrative Agent and Collateral
Agent, Chase Manhattan Bank Delaware as Issuing Bank (the "Credit Agreement")
(Incorporated by reference to Exhibit 10.4 to the Company's Registration Statement
on Form S-4 (No. 333-11905))
10.5 First Amendment to Credit Agreement dated as of January 30, 1997 (Amendment No. 1 to
"Credit Agreement")*
10.6 Purchase Agreement, dated as of January 29, 1997, with respect to Series 1997-1 Term
Certificates*
10.7 Amended and Restated Pooling Agreement, dated as of February 4, 1997, among LFI
Receivables Corporation, LFI Servicing Corporation and The Chase Manhattan Bank, as
Trustee*
10.8 Series 1997-1 Supplement to the Amended and Restated Pooling Agreement, dated as of
February 4, 1997, among LFI Receivables Corporation, LFI Servicing Corporation and
The Chase Manhattan Bank, as Trustee*
10.9 Series 1997-2 Supplement to the Amended and Restated Pooling Agreement, dated as of
February 4, 1997, among LFI Receivables Corporation, LFI Servicing Corporation, The
Chase Manhattan Bank as Agent and as Initial Purchaser and The Chase Manhattan Bank
as Trustee*
10.10 Amended and Restated Servicing Agreement, dated as of February 4, 1997, among LFI
</TABLE>
- ------------------------
* Filed herewith
50
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ----------- ------------------------------------------------------------------------------------
<C> <S> <S>
Receivables Corporation, LFI Servicing Corporation, as Master Servicer, each of the Servicers party
thereto and The Chase Manhattan Bank, as Trustee*
10.11 Amended and Restated Receivables Sale Agreement, dated as of February 4, 1997, among LFI Receivables
Corporation, the Sellers named therein and the Servicers named therein*
10.12 Stockholders' Agreement, dated as of August 5, 1996, among Masco Corporation, FURNISHINGS INTERNATIONAL
INC., 399 Venture Partners, Inc., Associate Madison Companies, Inc., and the other stockholders named
therein (the "Stockholders Agreement") (Incorporated by reference to Exhibit 10.10 to the Company's
Registration Statement on Form S-4 (No. 333-11905))
10.13 Amendment No. 1 to the Stockholder's Agreement dated as of December 17, 1996*
10.14 Amendment No. 2 to the Stockholder's Agreement dated as of March 26, 1997*
10.15 Registration Rights Agreement, dated as of August 5, 1996, among Masco Corporation, FURNISHINGS
INTERNATIONAL INC., 399 Venture Partners, Inc., Associate Madison Companies, Inc., and the other
stockholders named therein (Incorporated by reference to Exhibit 10.11 to the Company's Registration
Statement on Form S-4 (No. 333-11905))
10.16 Management Agreement, dated as of August 5, 1996, by and between FURNISHINGS INTERNATIONAL INC. and the
Company (Incorporated by reference to Exhibit 10.12 to the Company's Registration Statement on Form S-4
(No. 333-11905))
10.17 Tax Sharing Agreement, dated as of the 5th day of August 1996, by and between FURNISHINGS INTERNATIONAL
INC., Simmons Upholstered Furniture Corporation, the Company and LFI Receivables Corporation
(Incorporated by reference to Exhibit 10.13 to the Company's Registration Statement on Form S-4 (No.
333-11905))
10.18 Transition Services Agreement, dated as of August 5, 1996, among FURNISHINGS INTERNATIONAL INC. and Masco
Corporation (Incorporated by reference to Exhibit 10.14 to the Company's Registration Statement on Form
S-4 (No. 333-11905))
10.19 12.0% Senior Pay-in-Kind Note of FURNISHINGS INTERNATIONAL INC. dated August 5, 1996 (Incorporated by
reference to Exhibit 10.15 to the Company's Registration Statement on Form S-4 (No. 333-11905))
10.20 Purchase Agreement dated July 31, 1996 between the Company, Chase Securities Inc., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, and the Guarantors named therein (Incorporated by reference to Exhibit 10.16
to the Company's Registration Statement on Form S-4 (No. 333-11905))
10.21 Company's Retirement Benefit Restoration Plan*
10.22 Restricted Stock Plan of FURNISHINGS INTERNATIONAL INC.*
21 Subsidiaries of the Company*
27 Financial Data Schedule*
(b) Financial Statement Schedule
1. Financial Statement Schedule filed herewith:
Schedule II Valuation and Qualifying Accounts
</TABLE>
<TABLE>
<C> <S>
(c) Reports on Form 8-K
No reports on Form 8-K were filed by the registrant during the three months
ended December 31, 1996.
</TABLE>
- ------------------------
* Filed herewith
51
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereto duly authorized.
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
BY: /s/ WAYNE B. LYON
-----------------------------------------
Wayne B. Lyon
Chairman of the Board,
President and Chief Executive Officer
March 31, 1997
Pursuant to the requirements of the Securities Act of 1934, this Report has
been signed below by the following persons in the capacities and on the date
indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
Chairman of the Board, March 31, 1997
/s/ WAYNE B. LYON President and Chief
- ------------------------------ Executive Officer
Wayne B. Lyon (principal executive
officer)
Vice President, Treasurer March 31, 1997
/s/ RONALD J. HOFFMAN and Chief Financial Officer
- ------------------------------ (principal financial and
Ronald J. Hoffman accounting officer)
/s/ RICHARD M. CASHIN, JR. Director March 31, 1997
- ------------------------------
Richard M. Cashin, Jr.
/s/ ROBERT L. GEORGE Director March 31, 1997
- ------------------------------
Robert L. George
/s/ ROBERT C. LARSON Director March 31, 1997
- ------------------------------
Robert C. Larson
/s/ DAVID F. THOMAS Director March 31, 1997
- ------------------------------
David F. Thomas
/s/ MARTIN D. WALKER Director March 31, 1997
- ------------------------------
Martin D. Walker
52
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.:
Our report on the consolidated financial statements of LIFESTYLE FURNISHINGS
INTERNATIONAL LTD. and subsidiaries and the combined financial statements of the
Masco Home Furnishings Group is included on page 23 of this Form 10-K. In
connection with our audits of such financial statements, we have also audited
the related financial statement schedule listed in the index on page 51 of this
Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
Coopers & Lybrand, L.L.P.
Greensboro, North Carolina
February 18, 1997
53
<PAGE>
LIFESTYLE FURNISHINGS INTERNATIONAL
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN B
COLUMN A ADDITIONS COLUMN C COLUMN D COLUMN E
- ---------------------------------------------- ------------------------------ ----------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCES AT CHARGED TO CHARGED BALANCE AT
BEGINNING OF COSTS AND (CREDITED) TO END OF
PERIOD EXPENSES OTHER ACCOUNTS DEDUCTIONS PERIOD
--------------- ------------- ----------------- ------------- -------------
Allowance for doubtful accounts, deducted from
accounts receivables in the balance sheet
Aug. 6 to Dec. 31, 1996....................... $ 9.3 $ 1.6 $ (5.6) $ 0.5 $ 4.8
--- --- ----- --- ---
--- --- ----- --- ---
Jan. 1, 1996 to Aug. 5, 1996.................. $ 9.0 $ 2.3 $ -- $ 2.0 $ 9.3
--- --- ----- --- ---
--- --- ----- --- ---
Year ended December 31, 1995.................. $ 7.7 $ 6.6 $ -- $ 5.3 $ 9.0
--- --- ----- --- ---
--- --- ----- --- ---
Year ended December 31, 1994.................. $ 9.9 $ 5.7 $ -- $ 7.9 $ 7.7
--- --- ----- --- ---
--- --- ----- --- ---
</TABLE>
54
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
3.1 Certificate of Incorporation of LIFESTYLE FURNISHINGS INTERNATIONAL LTD. (the "Company")(Incorporated by
reference to Exhibit 3.1 to the Company's Registration Statement on Form S-4 (No. 333-11905))
3.2 By-Laws of the Company (Incorporated by reference to Exhibit 3.25 to the Company's Registration
Statement on Form S-4 (No. 333-11905))
4.1 Indenture between the Company and IBJ Schroder Bank & Trust Company, as Trustee, dated August 5, 1996
(Incorporated by reference to Exhibit 4 to the Company's Registration Statement on Form S-4 (No.
333-11905))
4.2 Supplemental Indenture dated December 20, 1996*
10.1 Acquisition Agreement between FURNISHINGS INTERNATIONAL INC. and Masco Corporation dated as of March 29,
1996 (Incorporated by reference to Exhibit 10.1 to the Company's Registration Statement on Form S-4 (No.
333-11905))
10.2 Amendment No. 1 to Acquisition Agreement dated as of June 21, 1996 (Incorporated by reference to Exhibit
10.2 to the Company's Registration Statement on Form S-4 (No. 333-11905))
10.3 Amendment No. 2 to Acquisition Agreement dated as of August 5, 1996 (Incorporated by reference to
Exhibit 10.3 to the Company's Registration Statement on Form S-4 (No. 333-11905))
10.4 Credit Agreement dated as of August 5, 1996 among FURNISHINGS INTERNATIONAL INC., the Company, the
subsidiary borrowers named therein, the lenders named therein and The Chase Manhattan Bank, as Swingline
Lender, Administrative Agent and Collateral Agent, Chase Manhattan Bank Delaware as Issuing Bank (the
"Credit Agreement") (Incorporated by reference to Exhibit 10.4 to the Company's Registration Statement
on Form S-4 (No. 333-11905))
10.5 First Amendment to Credit Agreement dated as of January 30, 1997 (Amendment No. 1 to "Credit
Agreement")*
10.6 Purchase Agreement, dated as of January 29, 1997, with respect to Series 1997-1 Term Certificates*
10.7 Amended and Restated Pooling Agreement, dated as of February 4, 1997, among LFI Receivables Corporation,
LFI Servicing Corporation and The Chase Manhattan Bank, as Trustee*
10.8 Series 1997-1 Supplement to the Amended and Restated Pooling Agreement, dated as of February 4, 1997,
among LFI Receivables Corporation, LFI Servicing Corporation and The Chase Manhattan Bank, as Trustee*
10.9 Series 1997-2 Supplement to the Amended and Restated Pooling Agreement, dated as of February 4, 1997,
among LFI Receivables Corporation, LFI Servicing Corporation, The Chase Manhattan Bank as Agent and as
Initial Purchaser and The Chase Manhattan Bank as Trustee*
10.10 Amended and Restated Servicing Agreement, dated as of February 4, 1997, among LFI Receivables
Corporation, LFI Servicing Corporation, as Master Servicer, each of the Servicers party thereto and The
Chase Manhattan Bank, as Trustee*
10.11 Amended and Restated Receivables Sale Agreement, dated as of February 4, 1997, among LFI Receivables
Corporation, the Sellers named therein and the Servicers named therein*
</TABLE>
- ------------------------
* Filed herewith
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.12 Stockholders' Agreement, dated as of August 5, 1996, among Masco Corporation,
FURNISHINGS INTERNATIONAL INC., 399 Venture Partners, Inc., Associate Madison
Companies, Inc., and the other stockholders named therein (the "Stockholders
Agreement") (Incorporated by reference to Exhibit 10.10 to the Company's
Registration Statement on Form S-4 (No. 333-11905))
10.13 Amendment No. 1 to the Stockholder's Agreement dated as of December 17, 1996*
10.14 Amendment No. 2 to the Stockholder's Agreement dated as of March 26, 1997*
10.15 Registration Rights Agreement, dated as of August 5, 1996, among Masco Corporation,
FURNISHINGS INTERNATIONAL INC., 399 Venture Partners, Inc., Associate Madison Compa-
nies, Inc., and the other stockholders named therein (Incorporated by reference to
Exhibit 10.11 to the Company's Registration Statement on Form S-4 (No. 333-11905))
10.16 Management Agreement, dated as of August 5, 1996, by and between FURNISHINGS
INTERNATIONAL INC. and the Company (Incorporated by reference to Exhibit 10.12 to
the Company's Registration Statement on Form S-4 (No. 333-11905))
10.17 Tax Sharing Agreement, dated as of the 5th day of August 1996, by and between
FURNISHINGS INTERNATIONAL INC., Simmons Upholstered Furniture Corporation, the
Company and LFI Receivables Corporation (Incorporated by reference to Exhibit 10.13
to the Company's Registration Statement on Form S-4 (No. 333-11905))
10.18 Transition Services Agreement, dated as of August 5, 1996, among FURNISHINGS INTER-
NATIONAL INC. and Masco Corporation (Incorporated by reference to Exhibit 10.14 to
the Company's Registration Statement on Form S-4 (No. 333-11905))
10.19 12.0% Senior Pay-in-Kind Note of FURNISHINGS INTERNATIONAL INC. dated August 5, 1996
(Incorporated by reference to Exhibit 10.15 to the Company's Registration Statement
on Form S-4 (No. 333-11905))
10.20 Purchase Agreement dated July 31, 1996 between the Company, Chase Securities Inc.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, and the Guarantors named therein
(Incorporated by reference to Exhibit 10.16 to the Company's Registration Statement
on Form S-4 (No. 333-11905))
10.21 Company's Retirement Benefit Restoration Plan*
10.22 Restricted Stock Plan of FURNISHINGS INTERNATIONAL INC.*
21 Subsidiaries of the Company*
27 Financial Data Schedule*
</TABLE>
- ------------------------
* Filed herewith
<PAGE>
Exhibit 4.2
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"),
dated as of December 20, 1996, among LIFESTYLE OUTLET
CORPORATION (the "New Guarantor Subsidiary"), a subsidiary of
Lifestyle Furnishings International Ltd. (or its successor), a
Delaware corporation (the "Company"), THE COMPANY, on behalf
of itself and the Guarantor Subsidiaries (the "Existing
Guarantor Subsidiaries") under the Indenture referred to
below, and IBJ SCHRODER BANK & TRUST COMPANY, a New York
banking corporation, as trustee under the indenture referred
to below (the "Trustee").
W I T N E S S E T H :
WHEREAS the Company has heretofore executed and delivered to the
Trustee an Indenture (the "Indenture"), dated as of August 5, 1996, providing
for the issuance of an aggregate principal amount of $200,000,000 of 10-7/8%
Senior Subordinated Notes due 2006 (the "Securities");
WHEREAS Section 4.15 of the Indenture provides that under certain
circumstances the Company is required to cause the New Guarantor Subsidiary to
execute and deliver to the Trustee a supplemental indenture pursuant to which
the New Guarantor Subsidiary shall unconditionally guarantee all of the
Company's obligations under the Securities pursuant to a Subsidiary Guaranty on
the terms and conditions set forth herein; and
WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the
Company and Existing Guarantor Subsidiaries are authorized to execute and
deliver this Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the New
Guarantor Subsidiary, the Company, the Existing Guarantor Subsidiaries and the
Trustee mutually covenant and agree for the equal and ratable benefit of the
holders of the Securities as follows:
1. Definitions. (a) Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
<PAGE>
2
(b) For all purposes of this Supplement, except as otherwise herein
expressly provided or unless the context otherwise requires: (i) the terms and
expressions used herein shall have the same meanings as corresponding terms and
expressions used in the Indenture; and (ii) the words "herein," "hereof" and
"hereby" and other words of similar import used in this Supplement refer to this
Supplement as a whole and not to any particular section hereof.
2. Agreement to Guarantee. The New Guarantor Subsidiary hereby
agrees, jointly and severally with all other Guarantor Subsidiaries, to
guarantee the Company's obligations under the Securities on the term and subject
to the conditions set forth in Article XI of the Indenture and to be bound by
all other applicable provisions of the Indenture.
3. Ratification of Indenture; Supplemental Indentures Part of
Indenture. Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. This Supplemental Indenture shall form a
part of the Indenture for all purposes, and every holder of Securities
heretofore or hereafter authenticated and delivered shall be bound hereby.
4. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
5. Trustee Makes No Representation. The Trustee makes no
representation as to the validity or sufficiency of this Supplemental Indenture.
6. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
7. Effect of Headings. The Section headings herein are for
convenience only and shall not effect the construction thereof.
<PAGE>
3
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
LIFESTYLE OUTLET CORPORATION,
by
_______________________________
Name:
Title:
LIFESTYLE FURNISHINGS INTERNATIONAL
LTD., on behalf of itself and the Existing Guarantor
Subsidiaries,
by
_______________________________
Name:
Title:
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee,
by
_______________________________
Name:
Title:
<PAGE>
Exhibit 10.5
FIRST AMENDMENT dated as of January 30, 1997 (this
"Amendment"), to the Credit Agreement dated as of August 5,
1996, (the "Credit Agreement"), among LIFESTYLE FURNISHINGS
INTERNATIONAL LTD., a Delaware corporation (the "Parent
Borrower"); the subsidiary borrowers named therein (the
"Subsidiary Borrowers" and, together with the Parent Borrower,
the "Borrowers"); FURNISHINGS INTERNATIONAL INC., a Delaware
corporation ("Holdings"); the Lenders (such term and each
other capitalized term used without definition in this
Amendment having the meaning assigned to such term in the
Credit Agreement); The Chase Manhattan Bank, a New York
banking corporation, as the Swingline Lender, as
Administrative Agent and as Collateral Agent for the Lenders;
and CHASE MANHATTAN BANK DELAWARE, as Issuing Bank.
WHEREAS the Borrowers have requested that the Lenders amend the Credit
Agreement and enter into the agreements as set forth below; and
WHEREAS Lenders constituting the Required Lenders are willing, on the
terms, subject to the conditions and to the extent set forth below, to effect
such amendment and enter into such agreements.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the Borrowers, Holdings, Lenders
constituting the Required Lenders, the Administrative Agent and the Issuing Bank
hereby agree, on the terms and subject to the conditions set forth herein, as
follows:
SECTION 1. Amendment. (a) Section 6.05 of the Credit Agreement is hereby
amended by deleting clause (d) thereof and substituting therefor the following:
(d) (i) Holdings, any Borrower or any Subsidiary may sell accounts
receivable and related assets to the Receivables Subsidiary pursuant to
any Permitted Receivables Financing or (ii) to the extent not included in
clause (i), (A) Sunbury may sell accounts receivable pursuant to factoring
arrangements entered into in the ordinary course of business in an
aggregate amount not to exceed $20,000,000 at any time outstanding and (B)
The Berkline Corporation may sell accounts receivable owed to it by
Montgomery Ward & Co., Inc. and its subsidiaries pursuant to factoring
arrangements entered into in the ordinary course of business in an
aggregate amount not to exceed $6,000,000 at any time outstanding.
SECTION 2. Representations and Warranties. The Borrowers represent and
warrant to each of the Lenders that:
<PAGE>
(a) The execution, delivery and performance by Holdings and the
Borrowers of this Amendment (i) have been duly authorized by all requisite
corporate and, if required, stockholder action and (ii) will not (A)
violate (1) any provision of law, statute, rule or regulation, the
certificate of incorporation or other constitutive documents or by-laws of
any Loan Party or (2) any order of any Governmental Authority, (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 any contractual obligation of
any Loan Party or (C) result in or require the creation or imposition of
any Lien (other than any Lien permitted under Section 6.02(r) of the
Credit Agreement after giving effect to this Amendment, or any Lien
created under the Credit Agreement or under the Security Documents) upon
or with respect to any property or assets now owned or hereafter acquired
by any Loan Party.
(b) This Amendment has been duly executed and delivered by Holdings
and the Borrowers and constitutes a legal, valid and binding obligation of
Holdings and the Borrowers enforceable against each of them in accordance
with its terms except as enforceability may be limited by bankruptcy,
insolvency or similar laws affecting creditors', rights generally or
equitable principles relating to or limiting creditors' rights generally.
(c) (i) The representations and warranties of the Borrowers set
forth in the Loan Documents are true and correct in all material respects
as of the date this Amendment is effective, except to the extent such
representations and warranties expressly relate to an earlier date (in
which case such representations and warranties shall have been true and
correct in all material respects on such earlier date) and (ii) no Default
has occurred and is continuing.
SECTION 3. Loan Documents. This Amendment and each certificate and
instrument delivered by any Loan Party in connection herewith shall be a Loan
Document for all purposes.
SECTION 4. Effectiveness. This Amendment shall become effective as of the
date hereof when the Administrative Agent shall have received copies hereof
that, when taken together, bear the signatures of each of the Borrowers,
Holdings and the Required Lenders.
SECTION 5. Notices. All notices hereunder shall be given in accordance with
the provisions of Section 9.01 of the Credit Agreement.
SECTION 6. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. No Novation. Except as expressly set forth herein, this
Amendment shall not by implication or otherwise limit, impair, constitute a
waiver of or otherwise affect the
-2-
<PAGE>
rights and remedies of any party under the Credit Agreement, nor alter, modify,
amend or in any way affect any of the terms, conditions, obligations, covenants
or agreements contained in the Credit Agreement, all of which are ratified and
affirmed in all respects and shall continue in full force and effect. This
Amendment shall apply and be effective only with respect to the provisions of
the Credit Agreement specifically referred to herein.
SECTION 8. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract. Delivery of an executed
counterpart of a signature page of this Amendment by facsimile transmission
shall be as effective as delivery of a manually executed counterpart of this
Amendment.
SECTION 9. Headings. Section headings used herein are for convenience of
reference only, are not part of this Amendment and are not to affect the
construction of, or to be taken into consideration in interpreting, this
Amendment.
-3-
<PAGE>
IN WITNESS WHEREOF, the Borrowers, Holdings and Lenders constituting the
Required Lenders have caused this Amendment to be duly executed by their duly
authorized officers, all as of the date and year first above written,
LIFESTYLE FURNISHINGS
INTERNATIONAL LTD., as the Parent Borrower,
by
_____________________
Name:
Title:
AMETEX FABRICS, INC.,
THE BERKLINE CORPORATION,
DREXEL HERITAGE FURNISHINGS, INC.,
HENREDON FURNITURE INDUSTRIES, INC.,
INTERIOR FABRIC DESIGN, INC.,
INTRO EUROPE, INC.,
LA TOURELL BARGE, INC.,
LEXINGTON FURNITURE INDUSTRIES, INC.,
LIFESTYLE HOLDINGS, LTD.,
MAITLAND-SMITH, INC.,
MARBRO LAMP COMPANY,
RAMM, SON & CROCKER, INC.,
ROBERT ALLEN FABRICS, INC.,
ROBERT ALLEN FABRICS OF N.Y., INC.,
SUNBURY TEXTILE MILLS, INC.,
UNIVERSAL FURNITURE LIMITED,
each as a Subsidiary Borrower,
by
_____________________
Name:
Title:
-4-
<PAGE>
FURNISHINGS INTERNATIONAL INC.,
by
_____________________
Name:
Title:
-5-
<PAGE>
THE CHASE MANHATTAN BANK,
individually and as Administrative Agent,
Collateral Agent and Swingline Lender,
by
_____________________
Name:
Title:
-6-
<PAGE>
CHASE MANHATTAN BANK DELAWARE,
as Issuing Bank,
by
_____________________
Name:
Title:
-7-
<PAGE>
ACADIA PARTNERS,
by
_____________________
Name:
Title:
-8-
<PAGE>
AERIES FINANCE LTD.,
by
_____________________
Name:
Title:
-9-
<PAGE>
AMSOUTH BANK OF ALABAMA,
by
_____________________
Name:
Title:
-10-
<PAGE>
[Intentionally left blank]
-11-
<PAGE>
BANK OF MONTREAL,
by
_____________________
Name:
Title:
-12-
<PAGE>
BANK OF SCOTLAND,
by
_____________________
Name:
Title:
-13-
<PAGE>
BANK OF TOKYO - MITSUBISHI TRUST
COMPANY,
by
_____________________
Name:
Title:
-14-
<PAGE>
CAPTIVA FINANCE LTD.,
by
_____________________
Name:
Title:
-15-
<PAGE>
CERES FINANCE, LTD.,
by
_____________________
Name:
Title:
-16-
<PAGE>
CHL HIGH YIELD LOAN PORTFOLIO
(a unit of The Chase Manhattan Bank),
by
_____________________
Name:
Title:
-17-
<PAGE>
CIBC INC.,
by
_____________________
Name:
Title:
-18-
<PAGE>
COMERICA BANK,
by
_____________________
Name:
Title:
-19-
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH,
by
___________________
Name:
Title:
-20-
<PAGE>
CREDIT LYONNAIS ATLANTA AGENCY,
by
_____________________
Name:
Title:
-21-
<PAGE>
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES,
by
_________________
Name:
Title:
by
_________________
Name:
Title:
-22-
<PAGE>
FIRST AMERICAN NATIONAL BANK,
by
_________________
Name:
Title:
-23-
<PAGE>
FIRST SOURCE FINANCIAL LLP,
By First National Source, Inc.,
Its Agent/Manager,
by
_____________________
Name:
Title:
-24-
<PAGE>
FLEET NATIONAL BANK,
by
_______________________
Name:
Title:
-25-
<PAGE>
HELLER FINANCIAL, INC.,
by
_____________________
Name:
Title:
-26-
<PAGE>
INDOSUEZ CAPITAL FUNDING II, LIMITED
By Indosuez Capital as Portfolio Advisor
by
___________________________
Name:
Title:
-27-
<PAGE>
ML CBO IV (CAYMAN) LTD.
BY PROTECTIVE ASSET MANAGEMENT,
L.L.C.
AS COLLATERAL MANAGER
by
_____________________
Name:
Title:
-28-
<PAGE>
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.,
by
_____________________
Name:
Title:
-29-
<PAGE>
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management, L.P.,
as Investment Advisor
By:
_______________________
Name:
Title:
-30-
<PAGE>
NBD BANK,
by
_____________________
Name:
Title:
-31-
<PAGE>
NEW YORK LIFE INSURANCE COMPANY,
by
___________________
Name:
Title:
-32-
<PAGE>
NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION,
By: NEW YORK LIFE INSURANCE
COMPANY
by
________________
Name:
Title:
-33-
<PAGE>
OAK HILL SECURITIES FUND, L.P.,
By: Oak Hill Securities GenPar, L.P.
its General Partner
By: Oak Hill Securities MGP, Inc.,
its General Partner
_________________________
Name:
Title:
-34-
<PAGE>
OCTAGON CREDIT INVESTORS LOAN
PORTFOLIO
(a unit of The Chase Manhattan Bank)
by
_____________________
Name:
Title:
-35-
<PAGE>
PILGRIM AMERICA PRIME RATE TRUST,
by
____________________
Name:
Title:
-36-
<PAGE>
PNC BANK, NATIONAL ASSOCIATION,
by
__________________
Name:
Title:
-37-
<PAGE>
PRIME INCOME TRUST,
by
_____________________
Name:
Title:
-38-
<PAGE>
[Intentionally left blank]
-39-
<PAGE>
THE BANK OF NEW YORK,
by
_____________________
Name:
Title:
-40-
<PAGE>
THE BANK OF NOVA SCOTIA,
by
_____________________
Name:
Title:
-41-
<PAGE>
THE DAI-ICHI KANGYO BANK, LTD.,
CHICAGO BRANCH,
by
_____________________
Name:
Title:
-42-
<PAGE>
THE FIRST NATIONAL BANK OF BOSTON,
by
_____________________
Name:
Title:
-43-
<PAGE>
THE MITSUBISHI TRUST AND BANKING
CORPORATION,
by
___________________
Name:
Title:
-44-
<PAGE>
RESTRUCTURED OBLIGATIONS BACKED BY
SENIOR ASSETS B.V.
BY: Chancellor LGT Senior Secured
Management, Inc. as Portfolio Advisor
by
______________________
Name:
Title:
-45-
<PAGE>
THE SANWA BANK, LIMITED,
CHICAGO BRANCH,
by
_____________________
Name:
Title:
-46-
<PAGE>
SENIOR DEBT PORTFOLIO
BY: Boston Management and Research
as Investment Adviser
by
_______________________
Name:
Title:
-47-
<PAGE>
SOUTHERN PACIFIC THRIFT & LOAN,
by
______________________
Name:
Title:
-48-
<PAGE>
U.S. NATIONAL BANK OF OREGON,
by
________________________
Name:
Title:
-49-
<PAGE>
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST,
by
__________________
Name:
Title:
-50-
<PAGE>
WACHOVIA BANK OF NORTH CAROLINA,
N.A.,
by
_______________________
Name:
Title:
-51-
<PAGE>
Exhibit 10.6
LFI RECEIVABLES MASTER TRUST
$120,000,000 Floating Rate Class A Certificates,
Series 1997-1
$15,000,000 Floating Rate Class B Certificates,
Series 1997-1
$15,000,000 Floating Rate Class C Certificates,
Series 1997-1
PURCHASE AGREEMENT
January 29, 1997
Chase Securities Inc.
270 Park Avenue
New York, New York 10017
Ladies and Gentlemen:
LFI Receivables Corporation, a Delaware corporation (the "Company")
and LFI Servicing Corporation, a Delaware corporation, as master servicer (the
"Master Servicer"), formed a master trust, the LFI Receivables Master Trust (the
"Trust"), pursuant to a Pooling Agreement, dated as of August 5, 1996, among the
Company, the Master Servicer and The Chase Manhattan Bank, as trustee (the
"Trustee") (as amended and restated on or about February 4, 1997, and as
amended, modified or supplemented thereafter, the "Pooling Agreement") which
will issue (i) $120,000,000 principal amount of its Floating Rate Class A
Certificates, Series 1997-1 (the "Class A Certificates"), (ii) $15,000,000
principal amount of its Floating Rate Class B Certificates, Series 1997-1 (the
"Class B Certificates") and (iii) $15,000,000 principal amount of its Floating
Rate Class C Certificates, Series 1997-1 (the "Class C Certificates", and
together with the Class A Certificates
<PAGE>
2
and the Class B Certificates, the "Term Certificates") pursuant to the Series
1997-1 Supplement (the "Supplement") to the Pooling Agreement. The Term
Certificates represent fractional undivided interests in the Trust. The assets
of the Trust include, among other things, the Receivables, the Related Property,
all Collections, all rights relating to the Receivables or arising therefrom,
the Receivables Sale Agreement (as hereinafter defined), the Servicing Agreement
(as hereinafter defined), the Collection Account, each Lockbox, each Lockbox
Account and all proceeds from the foregoing. The Receivables are serviced for
the Trust by the Servicers pursuant to a Servicing Agreement dated as of August
5, 1996, among the Company, the Master Servicer, the servicers party thereto
(the "Servicers") and the Trustee (as amended and restated on or about February
4, 1997, and as amended, modified or supplemented thereafter, the "Servicing
Agreement", and together with the Pooling Agreement and the Supplement, the
"Pooling and Servicing Agreements"). Capitalized terms used and not otherwise
defined herein shall have the meanings given them in the Pooling and Servicing
Agreements.
This is to confirm the agreement concerning the purchase of the Term
Certificates from the Trust by Chase Securities Inc. (the "Initial Purchaser").
The Term Certificates will be offered and sold to the Initial
Purchaser without being registered under the Securities Act of 1933 (the
"Securities Act"), in reliance on an exemption therefrom. The Company has
prepared a preliminary offering memorandum dated January 14, 1997 (the
"Preliminary Offering Memorandum"), and a final offering memorandum dated on or
about January 31, 1997 (the "Final Offering Memorandum", and together with the
Preliminary Offering Memorandum, the "Offering Memorandum"), setting forth or
including a description of the terms of the Term Certificates, a description of
the terms of Pooling and Servicing Agreements, the Receivables Sale Agreement,
and the other documents relating thereto (the "Series 1997-1 Transaction
Documents"), a description of the terms of the offering and a description of the
Company, the Master Servicer, the Sellers and the Servicers. Copies of the
<PAGE>
3
Preliminary Offering Memorandum and the Final Offering Memorandum have been
delivered by the Company to the Initial Purchaser pursuant to the terms of this
Agreement. Any references herein to the Preliminary Offering Memorandum, the
Final Offering Memorandum and the Offering Memorandum shall be deemed to include
all amendments and supplements thereto. The Company hereby confirms that it has
authorized the use of the Offering Memorandum and the Additional Information (as
hereinafter defined) in connection with the offering and resale of the Term
Certificates by the Initial Purchaser in accordance with Section 3 hereof.
1. Representations, Warranties and Agreements of the Company, the
Master Servicer, the Sellers and the Servicers. Each of the Company, the Master
Servicer, each Seller (as hereinafter defined) and each Servicer represents and
warrants to and agrees with the Initial Purchaser that:
(a) The Final Offering Memorandum and the Additional Information, as
of their respective dates did not, and the Final Offering Memorandum and the
Additional Information as of the Closing Date (as hereinafter defined) do not,
include any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that no representation or warranty is made as to information contained in or
omitted from the Final Offering Memorandum, as amended or supplemented, in
reliance upon and in conformity with written information furnished by the
Initial Purchaser specifically for use in the Final Offering Memorandum (the
"Initial Purchaser's Information"). The parties acknowledge and agree that the
Initial Purchaser's Information consists solely of the information included
under the captions "Purchase and Plan of Distribution" and "The Initial
Purchaser" in the Preliminary Offering Memorandum and the Final Offering
Memorandum.
(b) Assuming that the representations and warranties of the Initial
Purchaser in Section 3 hereof are true, correct and complete and that the
representations and
<PAGE>
4
warranties of each subsequent transferee from the Initial Purchaser set forth in
the Supplement are true, correct and complete, no registration under the
Securities Act of the Term Certificates is required for their respective offer,
sale and delivery by the Trust to the Initial Purchaser and by the Initial
Purchaser to the initial purchasers from the Initial Purchaser, in each case in
the manner contemplated by this Agreement, the Supplement and the Final Offering
Memorandum, and no qualification of the Pooling Agreement in respect of the Term
Certificates under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act") is required.
(c) Each Seller represents and warrants that the representations and
warranties of such Seller set forth in Article IV of the Receivables Sale
Agreement dated as of August 5, 1996, among the Company, the sellers named
therein (the "Sellers") and the Servicers named therein (as amended and restated
on or about February 4, 1997, and as amended, modified or supplemented
thereafter, the "Receivables Sale Agreement") are true and correct as of the
Closing Date.
(d) The Master Servicer and such Servicer represents and warrants
that the representations and warranties of the Master Servicer and such
Servicer, as the case may be, set forth in Article III of the Servicing
Agreement are true and correct as of the Closing Date.
(e) The Company represents and warrants that the representations and
warranties of the Company in Sections 2.03 and 2.04 of the Pooling Agreement are
true and correct as of the Closing Date.
(f) The Company, the Master Servicer, such Seller or such Servicer,
as the case may be, has the corporate power and authority to execute, deliver
and perform this Agreement and has taken all necessary corporate action to
authorize the execution, delivery and performance of this Agreement. No consent
or authorization of, filing with, or notice to any Governmental Authority, is
required in connection with the execution, delivery or performance of this
Agreement by or against the Company, the Master
<PAGE>
5
Servicer, such Seller or such Servicer, as the case may be, other than (i) those
which have been duly obtained or made and are in full force and effect on the
Closing Date and (ii) those that may be required under the state securities or
"blue sky" laws in connection with the offering or sale of the Term
Certificates. This Agreement has been duly executed and delivered by the
Company, the Master Servicer such Seller and such Servicer, as the case may be.
(g) This Agreement constitutes the legal, valid and binding
obligation of the Company, the Master Servicer, such Seller or such Servicer, as
the case may be, enforceable against the Company, the Master Servicer, such
Seller or such Servicer, as the case may be, in accordance with their 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).
(h) When duly authenticated by the Trustee in accordance with the
Pooling Agreement and delivered and paid for pursuant to this Agreement, the
Term Certificates will be duly issued and entitled to the benefits and security
afforded by the Pooling and Servicing Agreements and will constitute the valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms.
(i) The execution, delivery and performance of this Agreement and
the consummation by the Company, the Master Servicer, such Seller or such
Servicer, as the case may be, of the transactions contemplated hereby do not
violate any Requirement of Law or Contractual Obligation of the Company, the
Master Servicer, such Seller or such Servicer, as the case may be, which,
individually or in the aggregate, could reasonably be expected to have a Company
Material Adverse Effect, Seller Material Adverse Effect or Servicer Material
Adverse Effect, as the case may be, and will not result in, or require, the
creation or imposition
<PAGE>
6
of any Lien on any of its properties pursuant to any such Requirement of Law or
Contractual Obligation.
(j) There are no actions, suits, investigations or proceedings at
law or in equity or by or before any arbitrator, court or Governmental Authority
now pending or to the knowledge of the Company, the Master Servicer, such Seller
or such Servicer, as the case may be, threatened against or affecting such party
or any of its respective properties, which (i) assert the invalidity of this
Agreement or any of the Term Certificates, (ii) seek to prevent the issuance of
any of the Term Certificates or the consummation of any of the transactions
contemplated by this Agreement, (iii) seek any determination or ruling which
would be reasonably likely to adversely impair the performance by the Company,
the Master Servicer, such Seller or such Servicer, as the case may be, of its
obligations under, or the validity or enforceability of, the Term Certificates
or this Agreement, or (iv) that may adversely affect the Federal or state
income, excise, franchise or similar tax attributes of the Term Certificates.
(k) The Receivables Sale Agreement, the Pooling and Servicing
Agreements and the Term Certificates conform in all material respects with the
descriptions thereof contained in the Final Offering Memorandum.
(l) No securities of the same class (within the meaning of Rule
144A(d)(3) under the Securities Act) as the Term Certificates have been issued
by the Company, the Master Servicer, any Seller, any Servicer or the Trust and
are listed on any national securities exchange registered under Section 6 of the
Securities Exchange Act of 1934 (the "Exchange Act"), or quoted in a United
States automated inter-dealer quotation system.
(m) None of the Company, the Master Servicer, any Seller, any
Servicer nor any of their affiliates (as defined in Rule 501(b) of Regulation D)
has directly, or through any agent (i) sold, offered for sale, solicited offers
to buy or otherwise negotiated in respect of, any security (as defined in the
Securities Act) which is or will be integrated with
<PAGE>
7
the offering and sale of the Term Certificates under the doctrine of integration
referred to in Rule 502(a) of Regulation D or (ii) engaged in any form of
general solicitation or general advertising (within the meaning of Rule 502(c)
of Regulation D) in connection with the offering of the Term Certificates.
(n) None of the Company, the Master Servicer, any Seller, any
Servicer nor any of their affiliates has taken, and will not take, directly or
indirectly, any action designed to, or that might reasonably be expected to,
cause or result in stabilization or manipulation of the price of the Term
Certificates.
2. Purchase by the Initial Purchaser. On the basis of the
representations, warranties and agreements contained herein, and subject to the
terms and conditions set forth herein, the Company agrees to sell to the Initial
Purchaser and the Initial Purchaser agrees to purchase from the Company, the
entire principal amount of the (i) Class A Certificates at a purchase price
equal to 99.9375% of the principal amount thereof, (ii) Class B Certificates at
a purchase price equal to the principal amount thereof and (iii) Class C
Certificates at a purchase price equal to the principal amount thereof. The
Company will pay to Chase Securities Inc. a structuring and placement fee of (i)
$690,625 with respect to the Term Certificates and (ii) $325,000 with respect to
the VFC Certificates to be issued pursuant to the 1997-2 Supplement to the
Pooling Agreement.
The Company shall not be obligated to deliver any of the Term
Certificates except upon payment for all the Term Certificates to be purchased
as provided herein.
3. Sale and Resale of the Term Certificates by the Initial
Purchaser. (a) The Initial Purchaser represents and warrants to the Company that
it understands that the Term Certificates have not been and will not be
registered under the Securities Act and that it is purchasing the Term
Certificates pursuant to the exemption from registration under the Securities
Act provided by
<PAGE>
8
Section 4(2) thereof. The Initial Purchaser has advised the Company that it
proposes to offer the Term Certificates for resale upon the terms and conditions
set forth in this Agreement, in the Supplement and in the Final Offering
Memorandum. The Initial Purchaser hereby represents and warrants to, and agrees
with, the Company that it (i) is a Qualified Institutional Buyer (as hereinafter
defined) or Institutional Accredited Investor (as hereinafter defined), (ii)
will not solicit offers for, or offer or sell, the Term Certificates by means of
any form of general solicitation or general advertising or in any manner
involving a public offering within the meaning of Section 4(2) of the Securities
Act, (iii) will solicit offers for the Term Certificates only from, and will
offer, sell or deliver the Term Certificates, as part of their initial offering,
only to (A) persons in the United States whom the Initial Purchaser reasonably
believes to be qualified institutional buyers ("Qualified Institutional Buyers")
as defined in Rule 144A under the Securities Act (as such rule may be amended
from time to time, "Rule 144A") or, if any such person is buying for one or more
institutional accounts for which such person is acting as fiduciary or agent,
only when such person has represented to it that each such account is a
Qualified Institutional Buyer, to whom notice has been given that such sale or
delivery is being made in reliance on Rule 144A and (B) to a limited number of
other institutional accredited investors ("Institutional Accredited Investors")
as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act who take delivery of such Term Certificates in a minimum
denomination of at least U.S. $1,000,000 and who deliver a Purchaser Letter in
substantially the form attached as Annex A to the Final Offering Memorandum,
(iv) will furnish to each person purchasing the Term Certificates from it as
contemplated hereby the Final Offering Memorandum and any amendment or
supplement thereto and the Additional Information provided to it prior to the
date hereof, (v) will not offer or sell the Term Certificates other than to
persons the names of which have been supplied by it to the Company (and which
persons have not been disapproved by the Company) and (vi) will obtain a Class C
Transferee Letter for each purchaser of Class C Certificates.
<PAGE>
9
(b) The Initial Purchaser will not knowingly take any action with
the intent of facilitating (i) the registration, listing or trading of the Class
C Certificates on any national, foreign, regional, local or other stock exchange
or PORTAL or (ii) the development or existence of an "over the counter" market
for the Class C Certificates (including an interdealer quotation system that
regularly disseminates firm buy or sell quotations by identified brokers or
dealers by electronic means or otherwise).
(c) As requested by the Company, the Initial Purchaser agrees to
furnish to each person purchasing the Term Certificates from it, as contemplated
hereby, the reports set forth on Schedule 1 hereto (the "Additional
Information").
4. Delivery of and Payment for the Term Certificates.
(a) Delivery of and payment for the Term Certificates shall be made
at the offices of Cravath, Swaine & Moore, 825 Eighth Avenue, New York, New
York, or at such other place as shall be agreed upon by the Initial Purchaser
and the Company, at 10:00 a.m., New York City time, on February 4, 1997, or at
such other time or date, not later than three full business days thereafter, as
shall be agreed upon by the Initial Purchaser and the Company (such date and
time of payment and delivery being herein called the "Closing Date").
(b) On the Closing Date, payment shall be made to the Company in
same-day funds by wire transfer to such account or accounts as the Company shall
specify prior to the Closing Date or by such means as the parties hereto shall
agree prior to the Closing Date against delivery to the Initial Purchaser of the
certificates evidencing the Term Certificates. Time shall be of the essence, and
delivery at the time and place specified pursuant to this Agreement is a further
condition of the obligations of the Initial Purchaser hereunder. Upon delivery,
the Term Certificates shall be registered in such names and in such
denominations as the Initial Purchaser shall request in
<PAGE>
10
writing not less than two full business days prior to the Closing Date. For the
purpose of expediting the checking and packaging of certificates evidencing the
Term Certificates, the Company agrees to make such certificates available for
inspection by the Initial Purchaser at least 24 hours prior to the Closing Date.
5. Further Agreements of the Company. The Company agrees with the
Initial Purchaser:
(a) to furnish to the Initial Purchaser, without charge, as many
copies of the Preliminary Offering Memorandum and the Final Offering Memorandum
and any supplements and amendments thereto as it may reasonably request;
(b) that prior to making any amendment or supplement to the
Preliminary Offering Memorandum or the Final Offering Memorandum, the Company
shall furnish a copy thereof to the Initial Purchaser and counsel to the Initial
Purchaser and will not effect any such amendment or supplement to which the
Initial Purchaser shall reasonably object by notice to the Company after a
reasonable period of review;
(c) that if, at any time prior to completion of the distribution of
the Term Certificates by the Initial Purchaser to other purchasers any event
shall occur or condition exist as a result of which it is necessary, in the
opinion of counsel for the Initial Purchaser or counsel for the Company, to
amend or supplement the Offering Memorandum, subject to Section 5(b), in order
that the Offering Memorandum will not include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein not misleading in light of the circumstances existing at the time it is
delivered to a purchaser, or if it is necessary to amend or supplement the
Offering Memorandum to comply with applicable law, to promptly prepare such
amendment or supplement as may be necessary to correct such untrue statement or
omission or so that the Offering Memorandum, as so amended or supplemented, will
comply with applicable law and to furnish to the
<PAGE>
11
Initial Purchaser such number of copies thereof as it may reasonably request;
(d) that so long as the Term Certificates are outstanding and are
"Restricted Securities" within the meaning of Rule 144(a)(3) under the
Securities Act, to furnish to holders of the Term Certificates and prospective
purchasers of Term Certificates designated by such holders, upon request of such
holders or such prospective purchasers, the information required to be delivered
to maintain the eligibility of the Term Certificates for resale under Rule 144A
under the Securities Act;
(e) that so long as the Term Certificates are outstanding, to
furnish, or cause to be furnished, to the Initial Purchaser copies of all
materials furnished by the Company, the Master Servicer or the Servicers to the
Trustee or to the holders of the Term Certificates pursuant to the Pooling and
Servicing Agreements;
(f) to refrain from, and to cause its affiliates to refrain from,
selling, offering for sale or soliciting offers to buy or otherwise negotiating
in respect of any security (as defined in the Securities Act) which could be
integrated with the sale of Term Certificates in a manner which would require
the registration of the Term Certificates under the Securities Act or any
securities or "blue sky" laws of any jurisdiction;
(g) to refrain from, and to cause its affiliates to refrain from,
soliciting any offer to buy or offering to sell the Term Certificates by means
of any form of general solicitation or general advertising (as those terms are
used in Regulation D under the Securities Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities Act;
(h) to apply the net proceeds from the sale of the Term Certificates
as set forth in the Final Offering Memorandum;
<PAGE>
12
(i) to take such steps as shall be necessary to ensure that neither
the Company nor the Trust shall become an "investment company" within the
meaning of such term under the Investment Company Act of 1940, and the rules and
regulations of the Commission thereunder; and
(j) that to the extent, if any, that the ratings provided with
respect to the Term Certificates by Standard & Poor's Ratings Services ("S&P")
or Duff & Phelps Credit Rating Co. ("DCR") are conditioned upon the furnishing
of documents or the taking of any other actions by the Company, to furnish such
documents and take any such other actions.
6. Further Agreements of the Master Servicer, each Seller and each
Servicer. Each of the Master Servicer, each Seller and each Servicer agrees with
the Initial Purchaser:
(a) to refrain from, and to cause its affiliates to refrain from,
selling, offering for sale or soliciting offers to buy or otherwise negotiating
in respect of any security (as defined in the Securities Act) that could be
integrated with the sale of Term Certificates in a manner that would require the
registration of the Term Certificates under the Securities Act or any securities
or "blue sky" laws of any jurisdiction;
(b) to refrain from, and to cause its affiliates to refrain from,
soliciting any offer to buy or offering to sell the Term Certificates by means
of any form of general solicitation or general advertising (as those terms are
used in Regulation D under the Securities Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities Act; and
(c) that to the extent, if any, that the ratings provided with
respect to the Term Certificates by S&P and DCR are conditioned upon the
furnishing of documents or the taking of any other actions by the Master
Servicer, such Seller or such Servicer, as the case may be, will furnish such
documents and take any such other actions.
<PAGE>
13
7. Conditions of Initial Purchaser's Obligations. The obligations of
the Initial Purchaser hereunder are subject to the accuracy, when made and on
the Closing Date, of the representations and warranties of the Company, the
Master Servicer, each Seller and each Servicer contained herein, to the accuracy
of the statements of the Company, the Master Servicer, each Seller and each
Servicer made in any certificates delivered pursuant to the provisions hereof,
to the performance by the Company, the Master Servicer, each Seller and each
Servicer of their obligations hereunder, and to each of the following additional
terms and conditions:
(a) The Initial Purchaser shall not have discovered and disclosed to
the Company on or prior to the Closing Date that the Final Offering Memorandum
or the Additional Information or any amendment or supplement thereto contains an
untrue statement of a fact that, in the opinion of Cravath, Swaine & Moore,
counsel for the Initial Purchaser, is material or omits to state a fact that, in
the opinion of such counsel, is material and is necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) The Initial Purchaser shall have received from the Company, the
Master Servicer, each Seller and each Servicer, a certificate dated the Closing
Date of the Secretary or Assistant Secretary of the Company, the Master
Servicer, such Seller or such Servicer, as the case may be, certifying (i) that
the By-laws delivered to the Initial Purchaser on August 5, 1996, pursuant to
the Series 1996-A Supplement to the Pooling Agreement are true, correct and in
effect on the Closing Date, (ii) that attached thereto is a true and complete
copy of the resolutions of the Board of Directors of the Company, the Master
Servicer, such Seller or such Servicer, as the case may be, authorizing the
execution, delivery and performance of the Series 1997-1 Transaction Documents
to which it is a party, this Agreement and the transactions contemplated hereby
and thereby, and in the case of the Company, authorizing the execution, sale and
delivery of the Term Certificates, and that such resolutions have not been
amended, modified, revoked or rescinded and
<PAGE>
14
are in full force and effect on the Closing Date, (iii) that the certificate of
incorporation of the Company, the Master Servicer, such Seller or such Servicer,
as the case may be, delivered to the Initial Purchaser on August 5, 1996,
pursuant to the Series 1996-A Supplement to the Pooling Agreement is true,
correct and in effect on the Closing Date and has not been amended since the
last amendment thereto shown on the certificate of the Secretary of State of the
state of incorporation delivered on August 5, 1996, pursuant to the Series
1996-A Supplement to the Pooling Agreement and (iv) as to the incumbency and
specimen signature of each officer who executed, or is executing, any Series
1997-1 Transaction Documents, this Agreement or any other document delivered in
connection herewith or therewith.
(c) The Initial Purchaser shall have received copies of certificates
of compliance, of status or of good standing, dated as of a recent date from the
Closing Date from the Secretary of State or other appropriate authority of such
jurisdiction, with respect to the Company, the Master Servicer, each Servicer
and each Seller, (i) in its state of incorporation and (ii) in each state where
the ownership, lease or operation of property or the conduct of business
requires it to qualify as a foreign corporation, except where the failure to so
qualify would not have a material adverse effect on the business, operations,
properties or condition (financial or otherwise) of the Company, the Master
Servicer, such Servicer or such Seller, as the case may be.
(d) The Initial Purchaser shall have received certificates dated the
Closing Date of the President, Vice Chairman, Chief Financial Officer or any
Vice President of the Company, the Master Servicer, each Servicer and each
Seller either (i) attaching copies of all material consents, licenses and
approvals required in connection with the execution, delivery and performance by
the Company, the Master Servicer, such Servicer or such Seller, as the case may
be, of the Pooling and Servicing Agreements, the Receivables Sale Agreement
and/or this Agreement, as the case may be, and the validity and enforceability
of the Pooling and Servicing Agreements, the Receivables Sale
<PAGE>
15
Agreement and/or this Agreement against the Company, the Master Servicer, such
Servicer or such Seller, as the case may be, and such consents, licenses and
approvals shall be in full force and effect or (ii) stating that no such
consents, licenses or approvals are so required, except those that may be
required under state securities or "blue sky" laws.
(e) Each of the Series 1997-1 Transaction Documents, the Term
Certificates and the Offering Memorandum, all corporate proceedings and other
legal matters incident to the authorization, form and validity thereof and all
other legal matters relating to the Series 1997-1 Transaction Documents and the
transactions contemplated thereby shall be reasonably satisfactory in all
material respects to the Initial Purchaser and its counsel, and the Company
shall have furnished to such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters.
(f) Morgan, Lewis & Bockius LLP shall have furnished to the Initial
Purchaser its written opinion, as counsel to the Company, the Master Servicer,
each Seller and each Servicer, addressed to the Initial Purchaser and dated the
Closing Date, as to (i) certain corporate and securities law matters, in form
and substance reasonably satisfactory to the Initial Purchaser, (ii) true sale,
substantive consolidation and security interest matters, in form and substance
reasonably satisfactory to the Initial Purchaser, (iii) certain federal tax
matters, in form and substance reasonably satisfactory to the Initial Purchaser
and (iv) the effect that such counsel has participated in the preparation of the
Offering Memorandum and, based on such participation, that its work in
connection with such matter did not disclose any information that gave such
counsel reason to believe that the Final Offering Memorandum, as of its date or
as of the Closing Date, included or includes an untrue statement of a material
fact or omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
<PAGE>
16
(g) (i) Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P. shall
have furnished to the Initial Purchaser its written opinion, as North Carolina
counsel to the Company, the Master Servicer and certain of the Sellers and
Servicers, addressed to the Initial Purchaser and dated the Closing Date, which
shall be in form and substance satisfactory to the Initial Purchaser; (ii) Bass,
Berry & Sims PLC shall have furnished to the Initial Purchaser its written
opinion, as Tennessee counsel to certain of the Sellers and Servicers addressed
to the Initial Purchaser and dated the Closing Date, which shall be in form and
substance satisfactory to the Initial Purchaser; (iii) Hale and Dorr shall have
furnished to the Initial Purchaser its written opinion, as Massachusetts counsel
to certain of the Sellers and Servicers, addressed to the Initial Purchaser and
dated the Closing Date, which shall be in form and substance satisfactory to the
Initial Purchaser; and (iv) Raymond & Prokop, P.C. shall have furnished to the
Initial Purchaser its written opinion, as Michigan counsel to certain of the
Sellers and Servicers, addressed to the Initial Purchaser and dated the Closing
Date, which shall be in form and substance satisfactory to the Initial
Purchaser.
(h) Cadwalader, Wickersham & Taft, as counsel to the Trustee, shall
have furnished to the Initial Purchaser and the Company its written opinion,
addressed to the Initial Purchaser and the Company and dated the Closing Date,
which shall be in form and substance reasonably satisfactory to the Initial
Purchaser.
(i) The Initial Purchaser shall have received a letter, dated the
Closing Date, addressed to the Initial Purchaser and the Board of Directors of
the Company, (the "Procedures Letter") from Coopers & Lybrand LLP verifying the
accuracy of such financial and statistical data contained in the Final Offering
Memorandum as the Initial Purchaser shall deem advisable; provided, if any
amendment or supplement to the Final Offering Memorandum made after the date
hereof contains financial or statistical data, the Initial Purchaser shall have
received a letter dated the date of such amendment or supplement and addressed
to the
<PAGE>
17
Initial Purchaser confirming the Procedures Letter and providing additional
comfort on such new data.
(j) Each of the Company, the Master Servicer, each Seller and each
Servicer shall have furnished to the Initial Purchaser a certificate, dated the
Closing Date, of its Chairman of the Board, its President or a Vice President
and its chief financial officer stating that (i) such officers have carefully
examined the Offering Memorandum and the Additional Information, (ii) as of the
date hereof and the Closing Date, the Offering Memorandum and the Additional
Information, did not, and do not, include any untrue statement of a material
fact and did not, and do not, omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading and (iii) to the best of his or her knowledge, as
of the Closing Date, the representations and warranties of the Company, the
Master Servicer, such Seller or such Servicer, as the case may be, in this
Agreement are true and correct, the Company, the Master Servicer, such Seller or
such Servicer, as the case may be, has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied hereunder at
or prior to the Closing Date, and since September 30, 1996, there has been no
material adverse change in the financial position or results of operation of the
Company, the Master Servicer, such Seller or such Servicer, taken as a whole, or
any change, or any development including a prospective change, in or affecting
the condition (financial or otherwise), results of operations, business or
prospects of the Company, the Master Servicer, such Seller or such Servicer,
taken as a whole, that would be material to a holder of the Term Certificates,
except as set forth in the Offering Memorandum.
(k) Each of the Company, the Master Servicer, each Seller and each
Servicer shall have furnished to the Initial Purchaser such other documents and
evidence with respect to the Company, the Master Servicer, such Seller or such
Servicer as the Initial Purchaser may reasonably request in order to establish
the proper taking of all appropriate corporate proceedings in connection with
the
<PAGE>
18
transactions contemplated hereby and the compliance with the conditions set
forth herein.
(l) The Term Certificates shall have been given ratings by S&P and
DCR, that are at least equal to the ratings required for the Term Certificates
as set forth in the Final Offering Memorandum and S&P and DCR shall have
delivered letters to the Company confirming such ratings.
(m) The Initial Purchaser shall have received evidence reasonably
satisfactory to it that all Trust Accounts shall have been established pursuant
to the Pooling and Servicing Agreements.
(n) Any documents (including, without limitation, financing
statements) required to be filed in order (i) to perfect the sale of the
Receivables by each Seller to the Company pursuant to the Receivables Sale
Agreement and (ii) to create, in favor of the Trustee, a perfected
ownership/perfected first security interest in the Trust Assets under the
Pooling Agreement with respect to which an ownership/security interest may be
perfected by a filing under the UCC or other comparable statute shall, in each
case, have been properly prepared and filed in the manner required by the laws
of each appropriate jurisdiction, and such filings shall be the only filings
required in order to perfect the sale of the Receivables to the Company under
the Receivables Sale Agreement, or to the Trust under the Pooling Agreement, as
the case may be. The Initial Purchaser shall have received evidence reasonably
satisfactory to it of each such filing, registration or recordation and
reasonably satisfactory evidence of the payment of any necessary fee, tax or
expense relating thereto.
(o) The Initial Purchaser shall have received the results of a
recent search satisfactory to the Initial Purchaser of any UCC filings (or
equivalent filings) made with respect to the Company and the Sellers (and with
respect to such other Persons as the Initial Purchaser deems necessary) in the
states (or other jurisdictions) in which the chief executive office of the
Company, the Sellers and
<PAGE>
19
each such other Person is located, any offices of the Company, the Sellers and
each such other Person in which records have been kept relating to the
Receivables and the other jurisdictions in which UCC filings (or equivalent
filings) were made pursuant to the preceding subsection, together with copies of
the financing statements (or similar documents) disclosed by such search, and
accompanied by evidence satisfactory to the Initial Purchaser that any Liens
disclosed by such search would be Permitted Liens or have been released.
(p) The Initial Purchaser shall have received a pro forma balance
sheet for the Company giving effect to all transactions occurring on or before
the Issuance Date. The Initial Purchaser shall have received the consolidated
balance sheets and statements of income, stockholders' equity and cash flows of
the HFG Companies and their respective subsidiaries on a consolidated basis (i)
as of and for the fiscal year ended December 31, 1995, audited by and
accompanied by the opinion of Coopers & Lybrand LLP, independent public
accountants, and (ii) as of and for the fiscal quarters ended June 30, 1996 and
September 30, 1996, certified by its chief financial officer.
(q) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange or the
over-the-counter market shall have been suspended or limited, or minimum prices
shall have been established on either of such exchanges or such market by the
Securities and Exchange Commission, by such exchange or by any other regulatory
body or governmental authority having jurisdiction, (ii) a general moratorium on
commercial banking activities shall have been declared by Federal or New York
State authorities or (iii) an outbreak or escalation of hostilities or a
declaration by the United States of a national emergency or war or such a
material adverse change in general economic, political or financial conditions
(or the effect of international conditions on the financial markets in the
United States shall be such) as to make it, in the judgment of the Initial
Purchaser,
<PAGE>
20
impracticable or inadvisable to proceed with the sale or the delivery of the
Term Certificates on the terms and in the manner contemplated by this Agreement,
the Supplement and in the Final Offering Memorandum.
(r) The Initial Purchaser shall have received a copy of the written
Policies of the Sellers.
(s) The Initial Purchaser shall have received evidence satisfactory
to the Initial Purchaser of each Servicer's fidelity bond or other coverage
insuring against losses through wrongdoing of its officers and employees who are
involved in the servicing of Receivables, including coverage of depositor's
forgery, in an amount and breadth of coverage satisfactory to the Rating
Agencies and the Initial Purchaser.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Initial Purchaser.
8. Termination. The obligations of the Initial Purchaser hereunder
may be terminated by the Initial Purchaser, in its absolute discretion, by
notice given to and received by the Company prior to delivery of and payment for
the Term Certificates if, prior to that time, any of the events described in
Section 7(r) shall have occurred.
9. Reimbursement of Initial Purchaser's Expenses. The Sellers and
the Company, jointly and severally, agree to reimburse the Initial Purchaser on
the Closing Date, and as invoiced on a date to occur within a reasonable time
period thereafter, for the fees and expenses of its counsel and for such other
out-of-pocket expenses as shall have been incurred by them in connection with
this Agreement, the Series 1997-1 Transaction Documents and the proposed
purchase of the Term Certificates, whether or not the transactions contemplated
hereby are consummated. Such reimbursement obligation shall include, without
limitation, the cost of funds incurred by the Initial Purchaser in order
<PAGE>
21
to make payment to the Company for the Term Certificates in same-day funds.
10. Indemnification. (a) The Company, the Master Servicer, each
Seller and each Servicer shall, jointly and severally, indemnify and hold
harmless the Initial Purchaser, each person, if any, who controls the Initial
Purchaser within the meaning of the Securities Act, and each director, officer,
employee or agent of the Initial Purchaser and such controlling person
(collectively referred to for purposes of this Section 10 (other than paragraph
(b)) and Section 11 as the Initial Purchaser) from and against any loss, claim,
damage or liability, joint or several, or any action in respect thereof
(including, but not limited to, any loss, claim, damage, liability or action
relating to purchases and sales of Term Certificates), to which the Initial
Purchaser may become subject, under the Securities Act or otherwise, insofar as
such loss, claim, damage, liability or action arises out of, or is based upon,
(i) any untrue statement or alleged untrue statement of a material fact
contained in the Preliminary Offering Memorandum, the Final Offering Memorandum
or the Additional Information or in any amendment or supplement thereto or (ii)
the omission or alleged omission to state therein a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, and shall reimburse the Initial Purchaser
promptly upon demand for any legal or other expenses reasonably incurred by the
Initial Purchaser in connection with investigating or defending or preparing to
defend against or appearing as a third party witness in connection with any such
loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that none of the Company, the Master Servicer, any Seller nor
any Servicer shall be liable in any such case to the extent that any such loss,
claim, damage, liability or action arises out of, or is based upon, an untrue
statement or alleged untrue statement in or omission or alleged omission from
the Preliminary Offering Memorandum or the Final Offering Memorandum or any such
amendment or supplement in reliance upon an in conformity with the Initial
Purchaser's Information; and provided further that
<PAGE>
22
none of the Company, the Master Servicer, any Seller nor any Servicer shall be
liable under the indemnity agreement in this subsection (a) with respect to the
Preliminary Offering Memorandum to the extent that any such loss, claim, damage
or liability of the Initial Purchaser results from the fact that the Initial
Purchaser sold Term Certificates to a person as to whom it shall be established
that there was not sent or given, at or prior to the time of payment by such
person for such Term Certificates, a copy of the Final Offering Memorandum, as
then amended or supplemented and the loss, claim, damage or liability of the
Initial Purchaser results from an untrue statement or omission of a material
fact that was corrected in the Final Offering Memorandum, unless such failure to
deliver such documents was a result of noncompliance by the Company with Section
5(a).
(b) The Initial Purchaser shall indemnify and hold harmless the
Company, the Master Servicer, each Seller, each Servicer, each of their
respective directors, officers, employees or agents and each person, if any, who
controls the Company, the Master Servicer, each Seller and each Servicer within
the meaning of the Securities Act (for purposes of this Section 10 (other than
Section 10(a)) and Section 11 references to the Company, the Master Servicer,
each Seller and each Servicer shall be interpreted as collective references to
the Company, the Master Servicer, each Seller and each Servicer and their
respective directors, officers, employees, agents and controlling persons), from
and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof, to which the Company, the Master Servicer, each
Seller and each Servicer may become subject, under the Securities Act, or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in the Preliminary Offering Memorandum or the Final
Offering Memorandum or in any amendment or supplement thereto or (ii) the
omission or alleged omission to state therein a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, but in each case only to the extent that the
untrue
<PAGE>
23
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with the Initial Purchaser's Information, and
shall reimburse the Company, the Master Servicer, each Seller and each Servicer
for any legal or other expenses reasonably incurred by the Company, the Master
Servicer, each Seller and each Servicer in connection with investigating or
defending or preparing to defend against or appearing as a third party witness
in connection with any such loss, claim, damage, liability or action as such
expenses are incurred.
(c) Promptly after receipt by an indemnified party under this
Section 10 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 10, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 10 except to the extent that such
indemnifying party has been materially prejudiced by such failure and; provided
further, that the failure to notify the indemnifying party shall not relieve it
from any liability that it may have to an indemnified party otherwise than under
this Section 10. If any such claim or action shall be brought against an
indemnified party, it shall notify the indemnifying party thereof, and the
indemnifying party shall be entitled to participate therein and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party, to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under this
Section 10 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that an indemnified party shall have
the right to employ its own counsel in any such action, but the fees, expenses
and other charges of such counsel for the indemnified party will be at the
expense of
<PAGE>
24
such indemnified party unless (1) the employment of counsel by the indemnified
party has been authorized in writing by the indemnifying party, (2) the
indemnified party has reasonably concluded (based on advice of counsel to the
indemnified party) that there may be legal defenses available to it or other
indemnified parties that are different from or in addition to those available to
the indemnifying party, (3) a conflict or potential conflict exists (based upon
advice of counsel of the indemnified party) between the indemnified party and
the indemnifying party (in which case the indemnifying party will not have the
right to direct the defense of such action on behalf of the indemnified party)
or (4) the indemnifying party has not in fact employed counsel reasonably
satisfactory to the indemnified party to assume the defense of such action
within a reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable fees, disbursements and other
charges of counsel will be at the expense of the indemnifying party or parties.
It is understood that the indemnifying party or parties shall not, in connection
with any proceeding or related proceedings in the same jurisdiction, be liable
for the reasonable fees, disbursements and other charges of more than one
separate firm of attorneys (in addition to any local counsel) at any one time
for all such indemnified party or parties. Each indemnified party, as a
condition of the indemnity agreements contained in Sections 10(a) and 10(b),
shall use all reasonable efforts to cooperate with the indemnifying party in the
defense of any such action or claim. No indemnifying party shall be liable for
any settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there be a final judgment of the plaintiff in any such action, the
indemnifying party agrees to indemnify and hold harmless any indemnified party
from and against any loss or liability by reason of such settlement or judgment.
No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding
in respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party unless it
<PAGE>
25
obtains from the indemnified party an unconditional release of such indemnified
party from all liability or claims that are the subject matter of such
proceeding.
Notwithstanding the foregoing, for so long as any Term Certificates
are outstanding under the Pooling and Servicing Agreements, each Seller and each
Servicer agrees that it will make no claim against the Company or the Master
Servicer for contribution with respect to any indemnification obligation payable
by such Seller or Servicer pursuant to this Section 10 and Section 11.
The obligations of the Company, the Master Servicer, each Seller,
each Servicer and the Initial Purchaser in this Section 10 and Section 11 are in
addition to any other liability that the Company, the Master Servicer, each
Seller, each Servicer or the Initial Purchaser, as the case may be, may
otherwise have.
11. Contribution. If the indemnification provided for in Section 10
is unavailable or insufficient to hold harmless an indemnified party under
Section 10(a) or 10(b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Company, the Master Servicer, each
Seller and each Servicer on the one hand and the Initial Purchaser on the other
from the offering of the Term Certificates or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company, the Master Servicer, each
Seller and each Servicer on the one hand and the Initial Purchaser on the other
with respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company, the
Master Servicer, each Seller and each Servicer on the one hand and the Initial
<PAGE>
26
Purchaser on the other with respect to such offering shall be deemed to be in
the same proportion as the total net proceeds from the offering of the Term
Certificates purchased under this Agreement (before deducting expenses) received
by the Company, on the one hand, and the total discounts and commissions
received by the Initial Purchaser with respect to the Term Certificates
purchased under this Agreement, on the other hand, bear to the total gross
proceeds from the offering of the Term Certificates under this Agreement. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the
Company, the Master Servicer, a Seller or a Servicer on the one hand or the
Initial Purchaser on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission.
The Company, the Master Servicer, each Seller, each Servicer and the
Initial Purchaser agree that it would not be just and equitable if contributions
pursuant to this Section 11 were to be determined by pro rata allocation or by
any other method of allocation that does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 11 shall be deemed to include, for
purposes of this Section 11, any reasonable legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this Section 11, the
Initial Purchaser shall not be required to contribute any amount in excess of
the total discounts and commissions received by it in respect of the Term
Certificates sold and distributed by it. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
<PAGE>
27
12. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Initial Purchaser, the Company,
the Master Servicer, each Seller, each Servicer and their respective successors.
Nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any person, firm or corporation, other than the Initial
Purchaser, the Company, the Master Servicer, each Seller, each Servicer and
their respective successors and the controlling persons and officers, directors,
employees and agents referred to in Sections 10 and 11 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.
13. Expenses. The Company and the Sellers, jointly and severally,
agree with the Initial Purchaser to pay (a) the costs incident to the
authorization, issuance, sale, preparation and delivery of the Term Certificates
and any taxes payable in that connection, (b) the costs incident to the
preparation and printing of the Offering Memorandum and any amendments or
supplements thereto, (c) the costs of distributing the Offering Memorandum and
any amendments or supplements thereto, (d) the costs of preparing, printing,
reproducing and distributing the Series 1997-1 Transaction Documents and this
Agreement, (e) costs for the qualification of the Term Certificates under any
state securities or "blue sky" laws, including the costs of printing and mailing
a preliminary and final "blue sky" survey and the reasonable fees and
disbursements of counsel to the Initial Purchaser in connection therewith, (f)
the fees and disbursements of the Company's, the Master Servicer's, each
Seller's and each Servicer's counsel and accountants, (g) any fees charged by
rating agencies for rating the Term Certificates, (h) the fees and expenses of
the Trustee, any paying agent and DTC (including related reasonable fees and
expenses of any counsel for such parties), (i) any Federal, state or local
taxes, filing fees (including fees for Uniform Commercial Code financing
statements), or other similar payments to any Federal, state or local
governmental authority in connection with the offer, issuance, sale and delivery
of the Securities,
<PAGE>
28
(j) the fees and expenses of any special counsel to the Company, the Master
Servicer, each Seller, each Servicer or other experts required to be retained by
the Company, the Master Servicer, any Seller or any Servicer to provide advice,
opinions or assistance in connection with the offering, issuance, sale and
delivery of the Term Certificates; and (k) all other reasonable costs and
expenses incident to the performance of the Company's, the Master Servicer's,
each Seller's, and each Servicer's obligations hereunder that are not otherwise
specifically provided for in this Section.
14. Survival. The respective indemnities, rights of contribution,
representations, warranties and agreements of the Company, the Master Servicer,
any Seller or any Servicer and the Initial Purchaser contained in this Agreement
or made by or on behalf on them, respectively, pursuant to this Agreement, shall
survive the delivery of and payment for the Term Certificates and shall remain
in full force and effect, regardless of any (i) termination or cancellation of
this Agreement, (ii) any investigation made by or on behalf of any of them or
any person controlling any of them or (iii) acceptance of and payment for the
Term Certificates.
15. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Initial Purchaser, shall be delivered or sent by mail
or facsimile transmission and confirmed to Chase Securities Inc., 270 Park
Avenue, New York, New York 10017, Attention: Susan Voorhees, Fax Number:
(212) 834-6564;
(b) if to the Company, shall be delivered or sent by mail or
facsimile transmission and confirmed to the address of the Company set
forth in the Final Offering Memorandum, Attention: Ronald Hoffman, with a
copy to the Master Servicer at the address of the Master Servicer set
forth in the Servicing Agreement, Attention: Ronald Hoffman; and
<PAGE>
29
(c) if to any Seller or any Servicer, shall be delivered or sent by
mail or facsimile transmission and confirmed to the address of such Seller
or such Servicer, as the case may be, set forth in Schedule 4 to the
Receivables Sale Agreement.
Any such statements, requests, notices or agree ments shall take
effect at the time of receipt thereof.
16. Definitions of Certain Terms. For purposes of this Agreement,
"business day" means any day on which the New York Stock Exchange, Inc. is open
for trading.
17. 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 LAW PRINCIPLES.
18. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same instrument.
19. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
If the foregoing is in accordance with your understanding of the
agreement among the Company, the Master
<PAGE>
30
Servicer, the Sellers, the Servicers and the Initial Purchaser, kindly indicate
your acceptance in the space provided for that purpose below.
Very truly yours,
LFI RECEIVABLES CORPORATION,
by ____________________________________
Name:
Title:
LFI SERVICING CORPORATION,
by ____________________________________
Name:
Title:
AMETEX FABRICS, INC.,
Seller and Servicer,
by ____________________________________
Name:
Title:
THE BERKLINE CORPORATION,
Seller and Servicer,
by ____________________________________
Name:
Title:
<PAGE>
31
DREXEL HERITAGE
FURNISHINGS INC.,
Seller and Servicer,
by ____________________________________
Name:
Title:
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:
<PAGE>
32
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:
UNIVERSAL FURNITURE
INDUSTRIES, INC.,
Seller and Servicer,
<PAGE>
33
by ____________________________________
Name:
Title:
Accepted:
CHASE SECURITIES INC.,
by _____________________________
Name:
Title:
<PAGE>
Exhibit 10.7
================================================================================
LFI RECEIVABLES MASTER TRUST
AMENDED AND RESTATED
POOLING AGREEMENT
Among
LFI RECEIVABLES CORPORATION
LFI SERVICING CORPORATION
as Master Servicer
and
THE CHASE MANHATTAN BANK
as Trustee
Dated as of February 4, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
SECTION 1.01. Definitions........................................... 2
SECTION 1.02. Other Definitional Provisions......................... 41
ARTICLE II
Conveyance of Receivables; Representations
Warranties and Covenants
SECTION 2.01. Conveyance of Receivables............................. 43
SECTION 2.02. Acceptance by Trustee................................. 47
SECTION 2.03. Representations and Warranties of
the Company Relating to the
Company............................................. 48
SECTION 2.04. Representations and Warranties of
the Company Relating to the
Receivables......................................... 54
SECTION 2.05. Adjustment Payment for Ineligible
Receivables......................................... 55
SECTION 2.06. Purchase of Investor
Certificateholders' Interest in
Trust Portfolio..................................... 57
SECTION 2.07. Affirmative Covenants of the
Company............................................. 58
SECTION 2.08. Negative Covenants of
the Company......................................... 64
<PAGE>
TOC Amended and Restated Pooling Agreement Contents, p. 2
Page
----
ARTICLE III
Rights of Holders and
Allocation and Application of Collections
SECTION 3.01. Establishment of Collection
Account; Certain Allocations........................ 69
ARTICLE IV
ARTICLE IV IS RESERVED AND MAY BE
SPECIFIED IN ANY SUPPLEMENT WITH
RESPECT TO THE SERIES RELATING THERETO.
ARTICLE V
The Investor Certificates and
Exchangeable Company Interest
SECTION 5.01. The Investor Certificates............................. 77
SECTION 5.02. Authentication of Investor
Certificates........................................ 78
SECTION 5.03. Registration of Transfer and
Exchange of Investor
Certificates........................................ 79
SECTION 5.04. Mutilated, Destroyed, Lost or
Stolen Investor Certificates........................ 82
SECTION 5.05. Persons Deemed Owners................................. 83
SECTION 5.06. Appointment of Paying Agent........................... 84
SECTION 5.07. Access to List of Investor
Certificateholders' Names and
Addresses........................................... 85
SECTION 5.08. Authenticating Agent.................................. 86
SECTION 5.09. Tax Treatment......................................... 88
SECTION 5.10. Exchangeable Company Interest......................... 89
SECTION 5.11. Book-Entry Certificates............................... 93
SECTION 5.12. Notices to Clearing Agency............................ 94
SECTION 5.13. Definitive Certificates............................... 95
<PAGE>
TOC Amended and Restated Pooling Agreement Contents, p. 3
Page
----
ARTICLE VI
Other Matters Relating to the Company
SECTION 6.01. Liability of the Company.............................. 96
SECTION 6.02. Limitation on Liability of the
Company............................................. 96
ARTICLE VII
Early Amortization Events
SECTION 7.01. Early Amortization Events............................. 96
SECTION 7.02. Additional Rights upon the
Occurrence of Certain Events........................ 99
ARTICLE VIII
The Trustee
SECTION 8.01. Duties of Trustee..................................... 100
SECTION 8.02. Rights of the Trustee................................. 103
SECTION 8.03. Trustee Not Liable for Recitals....................... 106
SECTION 8.04. Trustee May Own Investor
Certificates........................................ 107
SECTION 8.05. Trustee's Fees and Expenses........................... 107
SECTION 8.06. Eligibility Requirements for
Trustee............................................. 109
SECTION 8.07. Resignation or Removal of
Trustee............................................. 109
SECTION 8.08. Successor Trustee..................................... 110
SECTION 8.09. Merger or Consolidation of
Trustee............................................. 111
SECTION 8.10. Appointment of Co-Trustee or
Separate Trustee.................................... 112
SECTION 8.11. Tax Returns........................................... 114
<PAGE>
TOC Amended and Restated Pooling Agreement Contents, p. 4
Page
----
SECTION 8.12. Trustee May Enforce Claims Without
Possession of Investor
Certificates........................................ 115
SECTION 8.13. Suits for Enforcement................................. 115
SECTION 8.14. Rights of Investor Certificate-
holders To Direct Trustee........................... 116
SECTION 8.15. Representations and Warranties of
Trustee............................................. 116
SECTION 8.16. Maintenance of Office or Agency....................... 117
SECTION 8.17. Limitation of Liability............................... 117
ARTICLE IX
Termination
SECTION 9.01. Termination of Trust.................................. 118
SECTION 9.02. Optional Purchase and Final
Termination Date of Investor
Certificates of Any Series.......................... 119
SECTION 9.03. Final Payment with Respect to Any
Series.............................................. 121
SECTION 9.04. Company's Termination Rights.......................... 123
ARTICLE X
Miscellaneous Provisions
SECTION 10.01. Amendment............................................. 123
SECTION 10.02. Protection of Right, Title and
Interest to Trust.................................... 126
SECTION 10.03. Limitation on Rights of Holders....................... 127
SECTION 10.04. Governing Law......................................... 128
SECTION 10.05. Notices............................................... 128
SECTION 10.06. Severability of Provisions............................ 130
SECTION 10.07. Assignment............................................ 130
SECTION 10.08. Investor Certificates Nonassessable
and Fully Paid...................................... 130
SECTION 10.09. Further Assurances.................................... 130
SECTION 10.10. No Waiver; Cumulative Remedies........................ 131
<PAGE>
TOC Amended and Restated Pooling Agreement Contents, p. 5
Page
----
SECTION 10.11. Counterparts.......................................... 131
SECTION 10.12. Third-Party Beneficiaries............................. 131
SECTION 10.13. Actions by Investor
Certificateholders.................................. 131
SECTION 10.14. Merger and Integration................................ 132
SECTION 10.15. Headings.............................................. 132
SECTION 10.16. Construction of Agreement............................. 132
SECTION 10.17. No Setoff............................................. 132
SECTION 10.18. No Bankruptcy Petition................................ 133
SECTION 10.19. Limitation of Liability............................... 133
SECTION 10.20. Certain Information................................... 134
<PAGE>
TOC Amended and Restated Pooling Agreement Contents, p. 6
EXHIBITS
Exhibits A-1 Forms of Lockbox Agreements
through A-15
Exhibit B Form of Annual Opinion of Counsel
Exhibit C Internal Operating Procedures
Memorandum
Exhibit D Depositary Agreement with BayBank
SCHEDULES
Schedule 1 Receivables
Schedule 2 Identification of the Trust Accounts
Schedule 3 Location of Chief Executive Office of
the Company
APPENDICES
Appendix A Description of Servicer Site Review
Procedures
Appendix B Description of Standby Liquidation
System
<PAGE>
AMENDED AND RESTATED POOLING AGREEMENT dated as of
February 4, 1997, among LFI RECEIVABLES CORPORATION, a
Delaware corporation (the "Company"); LFI SERVICING
CORPORATION, a Delaware corporation (in its capacity as master
servicer, the "Master Servicer"); and THE CHASE MANHATTAN
BANK, a New York banking corporation, not in its individual
capacity, but solely as trustee (in such capacity, the
"Trustee").
W I T N E S S E T H :
WHEREAS, as of August 5, 1996, (i) the Company, the Sellers and the
Servicers entered into a Receivables Sale Agreement (as amended and restated on
February 4, 1997, and as amended, supplemented or otherwise modified from time
to time thereafter, the "Receivables Sale Agreement") and (ii) the Company, the
Master Servicer, the Servicers and the Trustee entered into a Servicing
Agreement (as amended and restated on February 4, 1997, and as amended,
supplemented or otherwise modified from time to time thereafter, the "Servicing
Agreement");
WHEREAS, the parties hereto entered into that certain Pooling
Agreement, dated as of August 5, 1996 (the "Original Pooling Agreement") in
order to create a master trust to which the Company would transfer all its
right, title and interest in, to and under the Receivables and other Trust
Assets then or thereafter owned by the Company and such master trust has issued,
and shall, from time to time at the direction of the Company, issue one or more
Series of Investor Certificates, representing interests in the Receivables and
such other Trust Assets as specified in the Supplement related to such Series;
<PAGE>
Amended and Restated Pooling Agreement 2
WHEREAS, the parties hereto wish to amend and restate the Original
Pooling Agreement so as to amend various provisions of the Original Pooling
Agreement; and
WHEREAS, the Original Pooling Agreement shall be replaced in whole
by this Amended and Restated Pooling Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. Whenever used in this Agreement, the
following words and phrases shall have the following meanings:
"Accounts" shall have the meaning specified in subsection
2.01(a)(vi) of this Agreement.
"Accrual Period" shall mean, for any Series, the period from and
including a Distribution Date, or, in the case of the initial Accrual Period for
such Series, the Issuance Date for such Series, to but excluding the succeeding
Distribution Date.
"Adjusted Invested Amount" shall mean, with respect to any
Outstanding Series, the definition assigned to such term in the related
Supplement.
"Adjustment Payments" shall mean the collective reference to
payments of Transfer Deposit Amounts and Cash Dilution Payments.
"Affiliate" shall mean, with respect to any specified Person, any
other Person which, directly or
<PAGE>
Amended and Restated Pooling Agreement 3
indirectly, is in control of, is controlled by, or is under common control with,
such specified Person. For purposes of this definition "control" of a Person
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agent" shall mean, with respect to any Series, the Person, if any,
so designated in the related Supplement.
"Aggregate Adjusted Invested Amount" shall mean, with respect to any
date of determination, the sum of the Adjusted Invested Amounts with respect to
all Outstanding Series on such date of determination.
"Aggregate Allocated Receivables Amount" shall mean, with respect to
any date of determination, the sum of the Allocated Receivables Amounts with
respect to all Outstanding Series on such date of determination.
"Aggregate Daily Collections" shall mean, with respect to any
Business Day, the aggregate amount of all Collections deposited into the
Collection Account on such day.
"Aggregate Invested Amount" shall mean, at any date of
determination, the sum of the Invested Amounts with respect to all Outstanding
Series on such date of determination.
"Aggregate Overconcentration Amount" shall mean, with respect to any
date of determination, the sum of the Overconcentration Amounts of all Eligible
Obligors at the end of the preceding Business Day.
"Aggregate Receivables Amount" shall mean, with respect to any date
of determination, (i) the aggregate Principal Amount of all Eligible Receivables
in the Trust at
<PAGE>
Amended and Restated Pooling Agreement 4
the end of the Business Day immediately preceding such date minus (ii) the
Aggregate Overconcentration Amount for such date.
"Aggregate Target Receivables Amount" shall mean, with respect to
any date of determination, the sum of the Target Receivables Amounts with
respect to all Outstanding Series on such date of determination.
"Agreement" shall mean this Amended and Restated Pooling Agreement
and all amendments hereof and supplements hereto, and including, unless
expressly stated otherwise, each Supplement.
"Allocable Charged-Off Amount" shall have, with respect to any
Series, the meaning specified in subsection 3.01(e) and in any Supplement for
such Series.
"Allocable Recoveries Amount" shall have, with respect to any
Series, the meaning specified in subsection 3.01(e) and in any Supplement for
such Series.
"Allocated Receivables Amount" shall have, with respect to any
Outstanding Series, the meaning specified in the related Supplement for such
Outstanding Series.
"Amortization Period" shall have, with respect to any Outstanding
Series, the definition assigned to such term in the related Supplement.
"Applicable Insolvency Laws" shall have the meaning specified in
subsection 7.01(a).
"Bankruptcy Code" shall mean the United States Federal Bankruptcy
Code, 11 U.S.C. subsection 101-1330, as amended.
"BayBank Depository Agreement" shall mean the depository agreement
attached as Exhibit D hereto.
<PAGE>
Amended and Restated Pooling Agreement 5
"Board" shall mean the Board of Governors of the Federal Reserve
System of the United States of America.
"Book-Entry Certificates" shall mean certificates evidencing a
beneficial interest in the Investor Certificates, ownership and transfers of
which shall be made through book entries by a Clearing Agency as described in
Section 5.11; provided, however, that after the occurrence of a condition
whereupon book-entry registration and transfer are no longer permitted and
Definitive Certificates are issued to the Certificate Book-Entry Holders, such
Investor Certificates shall no longer be "Book-Entry Certificates".
"Business Day" shall mean any day other than (i) a Saturday or a
Sunday or (ii) another day on which commercial banking institutions or trust
companies in the State of New York or in the city where the Corporate Trust
Office is located, are authorized or obligated by law, executive order or
governmental decree to be closed; provided that, when used in connection with
the calculation of Certificate Rates which are determined by reference to LIBOR,
"Business Day" shall mean any Business Day banks are open for dealings in dollar
deposits in the London interbank market.
"Business Day Received" shall mean, except as otherwise set forth in
the applicable Supplement, (i) with respect to funds deposited in the Collection
Account (a) if funds are deposited in the Collection Account by 1:30 p.m., New
York City time, such day of deposit and (b) if funds are deposited in the
Collection Account after 1:30 p.m., New York City time, the Business Day
immediately following such day of deposit and (ii) with respect to funds
deposited in any Lockbox Account (a) if funds are deposited in such Lockbox
Account by the cut-off time established by the related Lockbox Processor for
same-day processing of deposits, such day of deposit and (b) if funds are
deposited in such Lockbox Account after such cut-off time, the Business Day
immediately following such day of deposit.
<PAGE>
Amended and Restated Pooling Agreement 6
"Cash Dilution Payment" shall have the meaning specified in
subsection 4.05(a) of the Servicing Agreement.
"Certificate Book-Entry Holder" shall mean, with respect to a
Book-Entry Certificate, the Person who is listed on the books of the Clearing
Agency, or on the books of a Person maintaining an account with such Clearing
Agency, as the beneficial owner of such Book-Entry Certificate (directly or as
an indirect participant, in accordance with the rules of such Clearing Agency).
"Certificate Rate" shall mean with respect to any Series and Class
of Investor Certificates, the percentage interest rate (or formula on the basis
of which such interest rate shall be determined) stated in the applicable
Supplement.
"Certificate Register" shall mean the register maintained pursuant
to subsection 5.03(a), providing for the registration of the Investor
Certificates and transfers and exchanges thereof.
"Charged-Off Receivables" shall mean, with respect to any Settlement
Period, all Receivables which, in accordance with the Policies of the applicable
Seller, have or should have been written off during such Settlement Period as
uncollectible, including without limitation the Receivables of any Obligor which
becomes the subject of any voluntary or involuntary bankruptcy proceeding.
"Class" shall mean, with respect to any Series, any one of the
classes of Investor Certificates of that Series as specified in the related
Supplement.
"Clean-Up Call Repurchase Price" shall have the meaning set forth in
subsection 9.02(a).
"Clearing Agency" shall mean each organization registered as a
"clearing agency" pursuant to Section 17A of the Securities Exchange Act of
1934.
<PAGE>
Amended and Restated Pooling Agreement 7
"Clearing Agency Participant" shall mean a broker, dealer, bank,
other financial institution or other Person for whom from time to time a
Clearing Agency effects book-entry transfers and pledges of securities deposited
with such Clearing Agency.
"Collection Account" shall have the meaning specified in subsection
3.01(a).
"Collections" shall mean all collections and all amounts received in
respect of the Receivables transferred to the Trust, including Recoveries,
Adjustment Payments, indemnification payments made by the Master Servicer, any
Servicer or the Company 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).
"Company" shall mean LFI Receivables Corporation, a Delaware
corporation.
"Company Collection Subaccount" shall have the meaning specified in
subsection 3.01(a).
"Company Exchange" shall have the meaning specified in subsection
5.10(a).
"Company Material Adverse Effect" shall mean (i) any material
impairment of the Company's ability to perform any of its material obligations
or to comply with or
<PAGE>
Amended and Restated Pooling Agreement 8
conduct its business in accordance with any of its material representations,
warranties, covenants or agreements under any Transaction Document or (ii) any
material impairment of the interests, rights or remedies of the Trustee or the
Investor Certificateholders against or with respect to the Company under any
Transaction Document.
"Company Subordinated Obligation" shall mean any payment obligation
or other liability designated as such in any Pooling and Servicing Agreement,
each of which payment obligations and other liabilities shall (i) be
subordinated and subject to the prior payment in full of all Company
Unsubordinated Obligations then due, (ii) be made solely from funds available to
the Company that are not required to be applied to Company Unsubordinated
Obligations then due and (iii) not constitute a general recourse claim against
the Company, but only a claim against the Company to the extent of funds
available to the Company after satisfying all Company Unsubordinated Obligations
then due.
"Company Unsubordinated Obligations" shall mean all payment
obligations and other liabilities of the Company under any Pooling and Servicing
Agreement that are not designated as Company Subordinated Obligations.
"Contractual Obligation" shall mean, as to any Person, any provision
of any security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Corporate Trust Office" shall mean the principal office of the
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of the execution of this Agreement is
located at The Chase Manhattan Bank, 450 W. 33rd Street, 15th Floor, New York,
New York 10001 (Attention of Advanced Structured Products Group).
<PAGE>
Amended and Restated Pooling Agreement 9
"Credit Agreement" shall mean the Credit Agreement dated as of
August 5, 1996, among: Lifestyle Furnishings International Ltd.; each subsidiary
of Lifestyle Furnishings International Ltd. listed on Schedule 1 thereto;
Furnishings International Inc.; the lenders identified therein; The Chase
Manhattan Bank, as a lender and as administrative agent and collateral agent for
the lenders; and Chase Manhattan Bank Delaware, as a letter of credit issuer
thereunder (including any amendments or modifications thereto or refinancings
thereof).
"Credit Enhancer" shall mean, with respect to any Series, that
Person, if any, designated as such in the applicable Supplement.
"Cut-Off Date", shall mean the close of business on January 29,
1997.
"DCR" shall mean Duff & Phelps Credit Rating Co., a nationally
recognized statistical rating organization, and any successor thereto.
"Daily Report" shall have the meaning specified in subsection 4.01
of the Servicing Agreement.
"Defaulted Receivable" shall mean any Receivable (a) which is unpaid
in whole or in part for more than 60 days after its original due date or (b)
which is a Charged-Off Receivable.
"Definitive Certificates" shall have the meaning specified in
Section 5.11.
"Depository" shall mean, with respect to any Series, the Clearing
Agency designated as the "Depository" in the related Supplement.
"Depository Agreement" shall mean, with respect to any Series, an
agreement among the Company, the Trustee and a
<PAGE>
Amended and Restated Pooling Agreement 10
Clearing Agency, in a form reasonably satisfactory to the Trustee and the
Company.
"Dilution Adjustment" shall mean any payments, rebates, discounts,
refunds or adjustments (including without limitation, as a result of the
application of any special or other discounts or any reconciliations) of any
Receivable, the amount owing for any returns (including, without limitation, as
a result of the return of any defective goods) or cancelations and the amount of
any other reduction of any payment under any Receivable, in each case granted or
made by the Seller to the related Obligor; provided, however, a "Dilution
Adjustment" does not include any Charged-Off Receivable.
"Distribution Date" shall mean, except as otherwise set forth in the
applicable Supplement, the 15th day of the month, or if such 15th day is not a
Business Day, the next succeeding Business Day.
"Dollars", "U.S. Dollars" and "$" shall mean dollars in lawful
currency of the United States of America.
"Early Amortization Event" shall have, with respect to any Series,
the meaning specified in Section 7.01 of this Agreement (without taking into
account any Supplements) and in any Supplement for such Series.
"Early Amortization Period" shall have, with respect to any Series,
the definition assigned to such term in Section 7.01 of this Agreement and in
any Supplement for such Series.
"Eligible Institution" shall mean a depositary institution or trust
company (which may include the Trustee and its Affiliates) organized under the
laws of the United States of America or any one of the states thereof or the
District of Columbia; provided, however, that at all times (i) such depositary
institution or trust company is a member of the Federal Deposit Insurance
Corporation, (ii) the
<PAGE>
Amended and Restated Pooling Agreement 11
unsecured and uncollateralized debt obligations of such depositary institution
or trust company are rated in one of the two highest long-term or short-term
rating categories by each Rating Agency and (iii) such depositary institution or
trust company has a combined capital and surplus of at least $100,000,000.
"Eligible Investments" shall mean any book-entry securities,
negotiable instruments or securities represented by instruments in bearer or
registered form which evidence:
(a) direct obligations of, and obligations fully guaranteed as to
timely payment by, the United States of America;
(b) Federal funds, demand deposits, time deposits or certificates of
deposit of any depositary institution or trust company incorporated under
the laws of the United States of America or any state thereof (or any
domestic branch of a foreign bank) and subject to supervision and
examination by federal or state banking or depositary institution
authorities; provided, however, that at the time of the investment or
contractual commitment to invest therein the commercial paper or other
short-term unsecured debt obligations (other than such obligations the
rating of which is based on the credit of a Person other than such
depository institution or trust company) thereof shall have a credit
rating from each of the Rating Agencies rating such investment in the
highest investment category granted thereby;
(c) commercial paper rated, at the time of the investment or
contractual commitment to invest therein, in the highest rating category
by each Rating Agency rating such commercial paper;
(d) investments in money market funds (including funds for which the
Trustee or any of its Affiliates is investment manager or adviser) rated
in the highest
<PAGE>
Amended and Restated Pooling Agreement 12
rating category by each Rating Agency rating such money market fund
(provided that, if such Rating Agency is S&P, such rating shall be
AAAm-G);
(e) bankers acceptances issued by any depository institution or
trust company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of America
or any agency or instrumentality thereof the obligations of which are
backed by the full faith and credit of the United States of America, in
either case entered into with a depository institution or trust company
(acting as principal) described in clause (b) above; or
(g) any other investment upon satisfaction of the Rating Agency
Condition with respect thereto.
"Eligible Letter of Credit" shall mean any irrevocable documentary
credit (a direct-pay letter of credit) or any irrevocable standby letter of
credit supporting a Receivable, or two or more Receivables sold to the Company
by the same Seller, that is (a) either (i) issued in favor of such Seller or the
Company and the right to draw under which is, or the proceeds of which are,
legally transferable and assignable to the Trustee or (ii) issued in favor of
the Trustee, (b) governed by the UCC of a state of the United States of America,
governed by the UCP 500 or governed as to certain terms by the UCP 500 and as to
any remaining terms by the UCC of a state of the United States of America, (c)
issued by a commercial bank that (i) has a combined capital and surplus of at
least $50,000,000 and (ii) has (or the holding company parent of which has)
either a long-term or a short-term senior unsecured debt rating in the highest
rating category by each Rating Agency and (d) permits the beneficiary to draw,
upon notice to the issuing bank, an amount equal to the entire Principal Amount
of any Receivable supported thereby in U.S.
<PAGE>
Amended and Restated Pooling Agreement 13
Dollars payable by the issuing bank to the Trustee, as assignee or as original
beneficiary, in the case of a documentary credit (a direct-pay letter of
credit), on or before the due date of such Receivable and, in the case of a
standby letter of credit, on or before the fifth day following the due date of
such Receivable.
"Eligible Obligor" shall mean, as of any date of determination, each
Obligor in respect of a Receivable that satisfies the following eligibility
criteria:
(a) it is "located" (within the meaning of Section 9-103(3)(d) of
the UCC as in effect in the State of New York) in the United States;
provided, however, that Obligors that are not so located within the United
States shall be deemed Eligible Obligors if (i) the Receivables of such
Obligor would satisfy the definition of "Eligible Receivable" in all
respects if they were owing by an Eligible Obligor, (ii) each Receivable
of such Obligor is supported by an Eligible Letter of Credit (and all
necessary actions are taken for the perfection of the transfer of such
Eligible Letter of Credit to the Trust, including the delivery requirement
set forth in subsection 2.01(b)) and (iii) as of any date of determination
after giving effect to any proposed transfer of Receivables to the Trust
owing by Obligors that would be deemed Eligible Obligors pursuant to this
proviso, the aggregate Principal Amount of all Receivables included in the
Trust Assets that have been or would be transferred to the Trust on the
basis of this proviso does not exceed 5% of the aggregate Principal Amount
of all Receivables then included in the Trust Assets;
(b) if it is a Federal Government Obligor or if it is a State/Local
Government Obligor, then such Obligor shall be subject to the first
proviso contained in the definition of "Overconcentration Amount";
<PAGE>
Amended and Restated Pooling Agreement 14
(c) it is not a Seller or an Affiliate of a Seller; and
(d) it is either (i) not the subject of any voluntary or involuntary
bankruptcy proceeding or (ii) a Qualifying DIP Obligor;
provided, however, that, if 35% or more of the Principal Amount of
Receivables of an Obligor (measured by the Principal Amount of Receivables
in the Trust) is reported as being aged 91 days or more after the
respective due dates of such Receivables as at the end of the Settlement
Period immediately preceding the most recent Settlement Report Date
(commencing with the September 10, 1996 Settlement Report Date), such
Obligor shall not be deemed an Eligible Obligor until such time as the
Master Servicer or the responsible Servicer furnishes the Rating Agencies
with a report (which may be part of a Daily Report or a Monthly Settlement
Statement) indicating that less than 35% of the Principal Amount of
Receivables of such Obligor then in the Trust are aged 91 days or more
after the respective due dates of such Receivables.
"Eligible Receivable" shall mean, as of any date of determination,
each Receivable owing by an Eligible Obligor in existence as of such date that
satisfies the following eligibility criteria:
(a) it constitutes either (i) an account within the meaning of
Section 9-106 of the UCC of the state the law of which governs the
perfection of the interest granted in it, (ii) an instrument within the
meaning of Section 9-105 of such UCC, which shall be subject to compliance
with the delivery requirement set forth in subsection 2.01(b), (iii)
chattel paper within the meaning of Section 9-105 of such UCC, which shall
be subject to compliance with the delivery requirement set forth in
subsection 2.01(b), or (iv) a general intangible (including to the extent
that such
<PAGE>
Amended and Restated Pooling Agreement 15
Receivable includes interest, finance charges, returned check or late
charges on sales or similar charges) within the meaning of Section 9-106
of such UCC;
(b) it is not a Defaulted Receivable;
(c) the goods related to it shall have been shipped or the services
related to it shall have been performed and such Receivable shall have
been billed to the related Obligor;
(d) it is denominated and payable only in U.S. Dollars in the United
States;
(e) it arose in the ordinary course of business from the sale of
goods, products or services of a Seller and in accordance with the
Policies of such Seller and, at such date of determination, the
Receivables Sale Agreement has not been terminated;
(f) it does not contravene any applicable law, rule or regulation
and the related Seller is not in violation of any law, rule or regulation
in connection with it, in each case which in any way renders such
Receivable unenforceable or would otherwise impair in any material respect
the collectibility of such Receivable;
(g) it is not a Receivable with an original repayment term in excess
of 180 days from the invoice date;
(h) if the Company and the Trust are not excluded from the
definition of "investment company" pursuant to Rule 3a-7 under the 1940
Act, it is an account receivable representing all or part of the sales
price of merchandise, insurance or services within the meaning of Section
3(c)(5) of the 1940 Act;
<PAGE>
Amended and Restated Pooling Agreement 16
(i) it is not a Receivable purchased by a Seller from any Person;
(j) it is not a Receivable for which a Seller has established an
offsetting specific reserve;
(k) it is not a Receivable in respect of which a Seller has (i)
entered into an arrangement with the Obligor pursuant to which payment of
any portion of the purchase price has been extended or deferred, whether
by means of a promissory note or by any other means, to a date more than
60 days from the due date or (ii) altered the basis of the aging from the
initial due date for payment such that the final due date extends to a
date more than 60 days from the invoice date or (iii) otherwise made any
modification except in the ordinary course of business and consistent with
the Policies of such Seller;
(l) all required consents, approvals or authorizations necessary for
the creation and enforceability of such Receivable and the effective
assignment and sale thereof by a Seller to the Company and by the Company
to the Trust shall have been obtained with respect to the Receivable;
(m) a Seller is not in default in any material respect under the
terms of the contract, if any, from which such Receivable arose;
(n) all right, title and interest in it has been validly sold by a
Seller to the Company pursuant to the Receivables Sales Agreement;
(o) the Company or the Trust will have legal and beneficial
ownership therein free and clear of all Liens other than such Liens
described in clause (i) of the definition of Permitted Liens and such
Receivable has been the subject of either a valid transfer from the
Company to the Trust or, alternatively, the grant
<PAGE>
Amended and Restated Pooling Agreement 17
of a first priority perfected security interest therein to the Trust free
and clear of all Liens other than such Liens described in clause (i) of
the definition of Permitted Liens;
(p) it represents an enforceable obligation of the related Obligor
to pay the full Principal Amount thereof and it is not subject to any
dispute in whole or in part or to any offset, counterclaim or defense;
(q) it is at all times the legal, valid and binding obligation of
the Obligor thereon, enforceable against such Obligor in accordance with
its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in
equity or law);
(r) as of the related Receivables Purchase Date, neither the Company
nor a Seller has (i) taken any action in contravention of the terms of any
Transaction Document or (ii) failed to take any action required to be
taken by the terms of any Transaction Document that, in either case, is
likely to impair the rights therein of the Trustee or Investor
Certificateholders with respect to such Receivable;
(s) each of the representations and warranties with respect to such
Receivable made in the Receivables Sale Agreement by the related Seller is
true and correct in all material respects; and
(t) at the time such Receivable was sold by the related Seller to
the Company under the Receivables Sale Agreement, no event described in
subsection 7.01(d) of the Receivables Sale Agreement (without giving
effect to any requirement as to the
<PAGE>
Amended and Restated Pooling Agreement 18
passage of time) had occurred with respect to such Seller;
provided that a Receivable which would otherwise not qualify as an Eligible
Receivable because of a failure to comply with clause (j) or (p) above shall
constitute an Eligible Receivable to the extent of the Principal Amount of such
Receivable minus the amount of such Receivable which fails to comply with such
clause (j) or (p); provided further that with respect to Receivables owing by
Government Obligors, such Receivables shall constitute Eligible Receivables
notwithstanding the failure of such Receivables to satisfy clause (l) above
except to the extent such failure adversely affects the actual collection of
such Receivables by the Company or the Trust.
"Eligible Successor Servicer" shall mean a Person which, at the time
of its appointment as Servicer (i) is legally qualified and has the corporate
power and authority to service the Receivables transferred to the Trust, (ii)
has demonstrated the ability to service a portfolio of similar receivables in
accordance with high standards of skill and care in the sole determination of
the Master Servicer and (iii) has a combined capital and surplus of at least
$5,000,000.
"Enhancement" shall mean, with respect to any Series (i) the funds
on deposit in or credited to any bank account (or subaccount thereof) of the
Trust, (ii) any surety arrangement, any letter of credit, guaranteed rate
agreement, maturity guaranty facility, tax protection agreement, interest rate
swap, currency swap or other contract, agreement or arrangement, in each case
for the benefit of any Investor Certificateholders of such Series, as designated
in the applicable Supplement and (iii) the subordination of one Class of
Investor Certificates in a Series to another Class in such Series or the
subordination of any Interest to the Investor Certificates of such Series.
<PAGE>
Amended and Restated Pooling Agreement 19
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Date" shall have the meaning, with respect to any Series
issued pursuant to an Exchange, specified in subsection 5.10(a).
"Exchange Notice" shall have the meaning, with respect to any Series
issued pursuant to an Exchange, specified in subsection 5.10(a).
"Exchange Register" shall have the meaning specified in subsection
5.10(a).
"Exchangeable Company Interest" shall have the meaning specified in
subsection 3.01(b) and shall be exchangeable as provided in Section 5.10.
"Excluded Note" shall mean any receivable (i) which originally
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 Receivable" shall mean, as of any date of determination,
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;
<PAGE>
Amended and Restated Pooling Agreement 20
(b) it is owing by an Obligor that is not "located" (within the
meaning of Section 9-103(3)(d) of 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;
(d) it is a Receivable originated by the Beacon Hill division of
Robert Allen Fabrics, Inc.; or
(e) it is owing by Montgomery Ward Holding Corporation or any of its
subsidiaries to The Berkline Corporation.
"Federal Government Obligor" shall mean the United States Federal
government or any subdivision thereof or any agency, department or
instrumentality thereof.
"Force Majeure Delay" shall mean, with respect to any Servicer, any
cause or event which is beyond the control and not due to the negligence of such
Servicer which delays, prevents or prohibits such Servicer's delivery of Daily
Reports and/or Monthly Settlement Statements, including, without limitation,
acts of God or the elements and fire, but shall not include strikes; provided
that no such cause or event shall be deemed to be a Force Majeure Delay unless
such Servicer shall have given the Company and the Trustee written notice
thereof as soon as reasonably possible after the beginning of such delay.
"Fractional Undivided Interest" shall mean a fractional undivided
interest, which, with respect to any Investor Certificate, can be expressed as a
percentage of the interest in the Trust Assets represented by the Series or
Class in which it was issued by taking the percentage equivalent of a fraction
the numerator of which is the principal amount of such Investor Certificate and
the denominator of which is the aggregate principal amount of all Investor
Certificates of such Series or Class.
<PAGE>
Amended and Restated Pooling Agreement 21
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time.
"General Opinion" shall mean, with respect to any action, an Opinion
of Counsel to the effect that (i) such action has been duly authorized by all
necessary corporate action on the part of the Servicers or the Company, as the
case may be and (ii) any agreement executed in connection with such action
constitutes a legal, valid and binding obligation of the Servicers or the
Company, as the case may be, enforceable in accordance with the terms thereof,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereinafter in effect,
affecting the enforcement of creditors' rights and except as such enforceability
may be limited by general principles of equity (whether considered in a
proceeding at law or in equity).
"Government Obligor" shall mean any Federal Government Obligor or
any State/Local Government Obligor.
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Holders" shall mean the collective reference to the Investor
Certificateholders, the holders of Subordinated Company Interests and the
holders of the Exchangeable Company Interest.
"Indebtedness" shall mean, with respect to any Person at any date,
(a) all indebtedness of such Person for borrowed money, (b) any obligation owed
for the deferred purchase price of property or services which purchase price is
evidenced by a note or similar written instrument, (c) notes payable and drafts
accepted representing extensions of credit whether or not representing
obligations
<PAGE>
Amended and Restated Pooling Agreement 22
for borrowed money, (d) that portion of obligations of such Person under capital
leases which is properly classified as a liability on a balance sheet in
conformity with GAAP and (e) all liabilities of the type described in the
foregoing clauses (a) through (d) secured by any Lien on any property owned by
such Person even though such Person has not assumed or otherwise become liable
for the payment thereof.
"Indemnified Person" shall have the meaning specified in Section
10.19.
"Independent Public Accountants" shall mean, with respect to any
Person, any independent certified public accountants of nationally recognized
standing which constitute one of the accounting firms commonly referred to as
the "big six" accounting firms (or any successor thereto); provided that such
firm is independent with respect to such Person within the meaning of Rule
2-01(b) of Regulation S-X under the Securities Act.
"Ineligibility Determination Date" shall have the meaning specified
in subsection 2.05(a).
"Ineligible Receivable" shall have the meaning specified in
subsection 2.05(a).
"Initial Closing Date" shall mean August 5, 1996.
"Initial Invested Amount" shall have, with respect to any Series,
the meaning specified in the related Supplement for such Series.
"Insolvency Event" shall mean the occurrence of any one or more of
the Early Amortization Events specified in paragraph (a) of Section 7.01.
"Interest" shall mean any interest in the Trust Assets issued
pursuant to the Agreement or any Supplement.
<PAGE>
Amended and Restated Pooling Agreement 23
"Internal Operating Procedures Memorandum" shall mean the internal
operating procedures memorandum prepared by the Trustee as set forth in Exhibit
C hereto.
"Internal Revenue Code" shall mean the Internal Revenue Code of
1986, as amended from time to time, and the rules and regulations promulgated
thereunder from time to time.
"Invested Amount" shall have, with respect to any Series, the
meaning specified in the related Supplement for such Series.
"Invested Percentage" shall have, with respect to any Series, the
meaning specified in the related Supplement for such Series.
"Investment" shall mean the making by the Company or any Seller of
any advance, loan, extension of credit or capital contribution to, the purchase
of any stock, bonds, notes, debentures or other securities of or any assets
constituting a business unit of, or the making by the Company or any Seller of
any other investment in, any Person.
"Investment Earnings" shall have the meaning specified in subsection
3.01(c).
"Investor Certificateholder" shall mean the holder of record of, or
the bearer of, an Investor Certificate.
"Investor Certificateholders' Interest" shall have the meaning
specified in subsection 3.01(b).
"Investor Certificates" shall mean the certificates executed by the
Company and authenticated by or on behalf of the Trustee, substantially in the
form attached to the applicable Supplement, but shall not include the
Exchangeable Company Interest, any Subordinated Company Interest or any other
Interest held by the Company.
<PAGE>
Amended and Restated Pooling Agreement 24
"Issuance Date" shall mean, with respect to any Series, the date of
issuance of such Series, or the date of any increase to the Invested Amount of
such Series, as specified in the related Supplement.
"LHL Guarantee" shall mean the Guarantee dated as of August 5, 1996,
executed by Lifestyle Holdings Ltd. guaranteeing the performance of the
obligations of the Master Servicer under the Pooling and Servicing Agreements.
"LHL Demand Note" shall mean the demand note dated August 5, 1996,
issued by Lifestyle Holdings Ltd. to the Company in the amount of $5 million
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed
of trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relating to such asset and
(c) in the case of securities, any purchase option, call or other similar right
of a third party with respect to such securities; provided, however, that if a
lien is imposed under Section 412(n) of the Internal Revenue 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 Internal Revenue Code or Section 302(f) of
ERISA applies, then such lien shall not be treated as a "Lien" from and after
the time (a)(i) any Person who is obligated to make such payment pays to such
plan the amount of such lien determined under Section 412(n)(3) of the Internal
Revenue Code or Section 302(f)(3) of ERISA, as the case may be, and provides to
the Trustee, the Rating Agencies and any Agent a written statement of the amount
of such lien together with written evidence of payment of such amount, or (ii)
such lien expires pursuant to Section 412(n)(4)(B) of the Internal Revenue Code
or Section 302(f)(4)(B) of ERISA and (b) the Rating Agency Condition shall have
been satisfied.
<PAGE>
Amended and Restated Pooling Agreement 25
"Lien Creation" shall mean the creation, incurrence, assumption or
suffering to exist by the Company or any Seller of any Lien upon the
Receivables, Related Property or the proceeds thereof.
"Lockbox" shall mean the post office boxes and accounts listed on
Schedule 2 to the Receivables Sale Agreement to which the Obligors are
instructed to remit payments on the Receivables and/or such other post office
boxes as may be established pursuant to Section 2.03 of the Servicing Agreement.
"Lockbox Account" shall mean the intervening account or accounts
used by a Lockbox Processor for deposit of funds received in a Lockbox prior to
their transfer to the Collection Account; provided, however, that until a
lockbox account is put into use for Collections received in respect of the
Receivables sold by Robert Allen Fabrics, Inc., the term "Lockbox Account" shall
include the account specified in the BayBank Depository Agreement used in lieu
of an actual lockbox account until such time as an actual lockbox account can be
put into use for such Collections.
"Lockbox Agreement" shall mean a lockbox agreement substantially in
the form set forth as Exhibit A-1, with such differences from such form as are
permitted upon satisfying the Rating Agency Condition and obtaining the consent
of each Agent as to such differences, or any of the lockbox agreements attached
as Exhibits A-2 through A-15.
"Lockbox Processor" shall mean the depositary institution or
processing company (which may be the Trustee) that processes payments on the
Receivables sent by the Obligors thereon forwarded to a Lockbox; provided,
however, in the case of the BayBank Depository Agreement, the term "Lockbox
Processor" shall include BayBank.
"Margin Stock" shall have the meaning given to such term in
Regulation U of the Board.
<PAGE>
Amended and Restated Pooling Agreement 26
"Master Servicer" shall mean LFI Servicing Corporation, a Delaware
corporation, and any Successor Master Servicer under the Transaction Documents.
"Material Adverse Effect" shall mean a material impairment of the
collectibility of the Receivables or a material impairment of the interests,
rights or remedies of the Trustee or the Investor Certificateholders of any
Outstanding Series under or with respect to the Transaction Documents. Without
limiting the generality of the preceding sentence, any effect, result or
circumstance that adversely affects the collectibility of Receivables accounting
for 5% or more of the aggregate Principal Amount of all Receivables in the Trust
shall be deemed to be a Material Adverse Effect.
"Monthly Servicing Fee" shall have the meaning specified in
subsection 2.05(a) of the Servicing Agreement.
"Monthly Settlement Statement" shall have the meaning specified in
Section 4.02 of the Servicing Agreement.
"1940 Act" shall mean the Investment Company Act of 1940, as
amended.
"Obligor" shall mean, with respect to any Receivable, the party
obligated to make payments with respect to such Receivable, including any
guarantor thereof.
"Officer's Certificate" shall mean, with respect to any Person,
unless otherwise specified in this Agreement, a certificate signed by the
Chairman of the Board, any Vice Chairman of the Board, the Chief Executive
Officer, the President, the Chief Financial Officer, any Vice President (however
denominated) or the Treasurer of such Person (or an officer holding an office
with equivalent or more senior responsibilities).
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Amended and Restated Pooling Agreement 27
"Opinion of Counsel" shall mean a written opinion or opinions of one
or more counsel (who may be internal counsel) to the Company, the Master
Servicer or any Servicer, designated by the Company, the Master Servicer or such
Servicer, as the case may be, that is reasonably acceptable to the Trustee.
"Optional Repurchase Percentage" shall have, with respect to any
Series, the meaning specified in the related Supplement for such Series.
"Optional Termination Notice" shall have, with respect to any
Series, the meaning specified in the related Supplement for such Series.
"Outstanding Series" shall mean, at any time, a Series issued
pursuant to an effective Supplement for which the Series Termination Date for
such Series has not occurred.
"Overconcentration Amount" shall mean, at any date with respect to
an Eligible Obligor, the Principal Amount of otherwise Eligible Receivables due
from such Obligor which, expressed as a percentage of the Principal Amount of
all Eligible Receivables in the Trust at such date, exceeds the percentage set
forth below for the applicable ratings category of that Obligor (or such larger
percentage upon satisfaction of the Rating Agency Condition);
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Amended and Restated Pooling Agreement 28
Minimum Rating
--------------
S&P DCR Percentage
- --- --- ----------
A-1+ or AA- D-1 or AA- 15.0%
A-1 or A+ D-1 or A+ 7.5%
A-2 or BBB+ D-2 or BBB+ 5.0%
A-3 or BBB- D-3 or BBB- 3.5%
Less than A-3 or Less than D-3 or
BBB-/Not rated BBB-/Not rated 3.0%
; provided, however, (i) that all Eligible Obligors that are Affiliates of each
other shall be deemed to be a single Eligible Obligor to the extent the Master
Servicer or any Servicer has actual knowledge of the affiliation and in that
case, the applicable debt rating for such group of Obligors shall be the debt
rating of the ultimate parent of the group, (ii) with respect to all Eligible
Obligors that are Government Obligors, such Obligors shall, notwithstanding the
foregoing, be deemed to be a single Eligible Obligor for which the applicable
percentage set forth under the column headed "Percentage" above shall be equal
to the Government Obligor Factor and (iii) with respect to the Obligor Heilig-
Meyers Company, the applicable percentage set forth under the column headed
"Percentage" above shall be 4.5% when its debt rating is "BBB-"; provided
further that the debt ratings set forth under the column headed "DCR" above and
references in the immediately succeeding paragraph to DCR shall apply only if
DCR is a Rating Agency under any Supplement for an Outstanding Series.
If the ratings given by S&P and DCR to the debt of any Obligor (or
the ultimate parent of the affiliated group of which such Obligor is a member,
as the case may be) would result in different applicable percentages under the
table above, the applicable percentage shall be the percentage associated with
the lower rating, as between S&P's rating and DCR's rating, of such Obligor's
(or such ultimate parent's, as the case may be) short-term senior debt;
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Amended and Restated Pooling Agreement 29
provided that: (i) if such short-term debt is rated only by S&P, the applicable
percentage will be the percentage associated with the rating issued by S&P and
(ii) if S&P issues no short-term rating with respect to such Obligor's (or such
ultimate parent, as the case may be), then the percentage applicable to such
Obligor (or such ultimate parent, as the case may be) shall be the percentage
associated with the categories "Less than A-3 or BBB-/Not rated" and "Less than
D-3 or BBB-/Not rated." The ratings specified in the table are minimums for each
percentage category, so that a rating not shown in the table falls in the
category associated with the highest rating shown in the table that is lower
than that rating.
"Paying Agent" shall mean any paying agent and co-paying agent
appointed pursuant to Section 5.06 and, unless otherwise specified in the
related Supplement of any Series and with respect to such Series, shall
initially be The Chase Manhattan Bank.
"Permitted Liens" shall mean, at any time, for any Person:
(i) Liens created pursuant to this Agreement or the Receivables Sale
Agreement;
(ii) Liens for taxes, assessments or other governmental charges or
levies not yet due and with respect to which reserves in conformity with
GAAP have been provided on the books of such Person; and
(iii) Liens on a Receivable arising as a result of offsetting specific
reserves and rights of set-off, counterclaim or other defenses with
respect to such Receivable.
"Person" shall mean any individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Authority or other entity of whatever nature.
<PAGE>
Amended and Restated Pooling Agreement 30
"Policies" shall mean, with respect to each Seller, the credit and
collection policies of such Seller, copies of which have been previously
delivered to the Trustee, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with the Transaction Documents.
"Pooling and Servicing Agreements" shall have the meaning specified
in subsection 10.01(a).
"Potential Early Amortization Event" shall mean an event which, with
the giving of notice and/or the lapse of time, would constitute an Early
Amortization Event hereunder or under any Supplement.
"Potential Servicer Default" shall mean an event which, with the
giving of notice and/or the lapse of time, would constitute a Servicer Default
hereunder or under any Supplement.
"Prepayment Request" shall have, with respect to any Series, the
meaning specified in the related Supplement.
"Principal Amount" shall mean, with respect to any Receivable, the
amount due thereunder.
"Principal Terms" shall have the meaning, with respect to any Series
issued pursuant to an Exchange, specified in subsection 5.10(c).
"Program Costs" shall have, with respect to any Series, the meaning
specified in the related Supplement for such Series.
"Qualifying DIP Obligor" shall mean, as of any date of
determination, each Receivable owing by an Obligor (i) that is a "debtor in
possession", for which no trustee or examiner has been appointed and no
application is pending for the appointment of a trustee or examiner, in a case
under Chapter 11 of the Bankruptcy Code in which no motion
<PAGE>
Amended and Restated Pooling Agreement 31
has been made for an order liquidating all or any substantial portion of such
debtor's assets and no motion has been made for the conversion of such case to a
case under Chapter 7 of the Bankruptcy Code, (ii) in the case of any proposed
Qualifying DIP Obligor whose Receivables would, if included in the Trust Assets,
account for 1% or more of the aggregate Principal Amount of all Receivables
included in the Trust, each Agent has been given notice at least five Business
Days prior to any transfer of Receivables owing by such Obligor to the Trust of
the proposed inclusion of such Obligor as an Eligible Obligor on the basis of
being a Qualifying DIP Obligor, (iii) as to which no Agent has, in the exercise
of its reasonable discretion, given notice to the Company and the Master
Servicer that such Obligor shall not be included as an Eligible Obligor and (iv)
for which the Obligor has obtained the approval of a bankruptcy court to make
payment thereon.
"Rating Agency" shall mean, with respect to each Outstanding Series,
any rating agency or agencies designated as such in the related Supplement;
provided that (i) in the event that no Outstanding Series has been rated, then
for purposes of the definitions of "Eligible Institution" and "Eligible
Investments", "Rating Agency" shall mean S&P; (ii) except as provided in (i), in
the event no Outstanding Series has been rated, any reference to "Rating Agency"
or the "Rating Agencies" shall be deemed to have been deleted herefrom, except
that references to the term "Rating Agency Condition" shall not be deemed
deleted, but shall be modified as set forth under the definition of such term.
"Rating Agency Condition" shall mean, with respect to any action,
that each Rating Agency shall have notified the Company, the Master Servicer,
any Agent and the Trustee in writing that such action will not result in a
reduction or withdrawal of the rating of any Outstanding Series or any Class of
any such Outstanding Series with respect to which it is a Rating Agency;
provided that in the event that no Outstanding Series has been rated, any
reference to a "Rating Agency Condition" shall be deemed to be a reference
<PAGE>
Amended and Restated Pooling Agreement 32
to the prior written consent of the Agent with respect to such action.
"Receivable" shall mean the indebtedness and payment obligations of
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.
"Receivables Purchase Date" shall mean, with respect to any
Receivable, the Business Day on which the Company purchases such Receivable from
a Seller and transfers such Receivable to the Trust.
"Receivables Sale Agreement" shall mean the Amended and Restated
Receivables Sale Agreement, dated as of the date hereof, among the Sellers, the
Servicers and the Company, as amended, supplemented or otherwise modified from
time to time in accordance with the Transaction Documents.
"Record Date", shall mean, with respect to any Series, the date
specified as such in the applicable Supplement.
"Recoveries" shall mean all amounts collected (net of out-of-pocket
costs of collection) in respect of Charged-Off Receivables.
"Regulation G" shall mean Regulation G of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
<PAGE>
Amended and Restated Pooling Agreement 33
"Regulation U" shall mean Regulation U of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation X" shall mean Regulation X of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Related Property" shall mean, with respect to each Receivable:
(a) all of a Seller's interest in the goods (including returned
goods), if any, relating to the sale which gave rise to such Receivable;
(b) all other security interests or Liens and property subject
thereto from time to time purporting to secure payment of such Receivable,
whether pursuant to the contract related to such Receivable or otherwise,
together with all financing statements signed by an Obligor describing any
collateral securing such Receivable; and
(c) all guarantees, insurance, letters of credit (including any
Eligible Letter of Credit) and other agreements or arrangements of
whatever character from time to time supporting or securing payment of
such Receivable whether pursuant to the contract related to such
Receivable or otherwise;
including in the case of clauses (b) and (c), without limitation, pursuant to
any obligations evidenced by an account, note, instrument, contract, security
agreement, chattel paper, general intangible or other evidence of indebtedness
or security.
"Reported Day" shall have the meaning specified in subsection
4.01(a) of the Servicing Agreement.
<PAGE>
Amended and Restated Pooling Agreement 34
"Requirement of Law" for any Person shall mean the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation, or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"Responsible Officer" shall mean (i) when used with respect to the
Trustee, any officer within the Corporate Trust Office of the Trustee including
any Vice President, any Assistant Vice President, Trust Officer or Assistant
Trust Officer or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
(ii) when used with respect to any other Person, the Chairman of the Board, any
Vice Chairman of the Board, the Chief Executive Officer, the President, the
Chief Financial Officer, any Vice President or the Treasurer of such Person.
"Restricted Payments" shall have the meaning assigned in subsection
2.08(o).
"Revolving Period" shall have, with respect to any Outstanding
Series, the definition assigned to such term in the related Supplement.
"S&P" shall mean Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc. or any successor thereto.
"Securities Act" shall mean the Securities Act of 1933.
"Seller" shall mean each Seller listed as a party to, on Schedule 1
of, the Receivables Sale Agreement.
"Seller Material Adverse Effect" shall mean, with respect to any
Seller, (i) any material impairment of such
<PAGE>
Amended and Restated Pooling Agreement 35
Seller's ability to perform any of its material obligations or to comply with or
conduct its business in accordance with any of its material representations,
warranties, covenants or agreements under any Transaction Document or (ii) any
material impairment of the interests, rights or remedies of the Trustee or the
Investor Certificateholders against or with respect to such Seller under any
Transaction Document, including any interests, rights or remedies of the Trustee
or the Investor Certificateholders as an assignee or assignees of the Company
under, or a third-party beneficiary or third-party beneficiaries of, the
Receivables Sale Agreement.
"Seller Note" shall have the meaning specified in Section 8.01 of
the Receivables Sale Agreement.
"Series" shall mean any series of Investor Certificates and any
related Subordinated Company Interest, the terms of which are set forth in a
Supplement.
"Series Account" shall mean any deposit, trust, escrow, reserve or
similar account maintained for the benefit of the Investor Certificateholders
and the holders of the related Subordinated Company Interest of any Series or
Class, as specified in any Supplement.
"Series Collection Subaccount" shall have the meaning specified in
subsection 3.01(a).
"Series Collection Sub-subaccount" shall have the meaning specified
in subsection 3.01(a).
"Series Non-Principal Collection Sub-subaccount" shall have the
meaning specified in subsection 3.01(a).
"Series Principal Collection Sub-subaccount" shall have the meaning
specified in subsection 3.01(a).
<PAGE>
Amended and Restated Pooling Agreement 36
"Series Termination Date" shall have, with respect to any Series,
the meaning specified in the related Supplement for such Series.
"Service Transfer" shall have the meaning specified in Section 6.01
of the Servicing Agreement.
"Servicer" shall initially mean each Servicer identified in Schedule
1 to the Receivables Sale Agreement and, after any Service Transfer, the
Successor Servicer.
"Servicer Default" shall have, with respect to any Series, the
meaning specified in Section 6.01 of the Servicing Agreement and, if applicable,
as supplemented by the related Supplement for such Series.
"Servicer Material Adverse Effect" shall mean, with respect to the
Master Servicer or any Servicer, (i) any material impairment of such Person's
ability to perform any of its material obligations or to comply with or conduct
its business in accordance with any of its material representations, warranties,
covenants or agreements under any Transaction Document or (ii) any material
impairment of the interests, rights or remedies of the Trustee or the Investor
Certificateholders against or with respect to such Person under any Transaction
Document.
"Servicer Site Review" shall mean a review performed by the Trustee
of the servicing operations of the Servicer's central site locations, as
described in Appendix A.
"Servicing Agreement" shall have the meaning specified in the
recitals hereto.
"Servicing Fee" shall have the meaning specified in subsection
2.05(a) of the Servicing Agreement.
"Servicing Fee Percentage" shall mean 1% per annum.
<PAGE>
Amended and Restated Pooling Agreement 37
"Settlement Period" shall mean each fiscal month of the Servicers.
"Settlement Report Date" shall mean, except as otherwise set forth
in the applicable Supplement, the 10th day of each calendar month or, if such
10th day is not a Business Day, the next succeeding Business Day.
"Special Allocation Settlement Report Date" shall have the meaning
specified in subsection 3.01(e).
"Specified Bankruptcy Opinion Provisions" shall mean the factual
assumptions (including those contained in the factual certificate referred to
therein) and the actions to be taken by the Sellers or the Company in each case
in the legal opinion of Morgan, Lewis & Bockius LLP relating to certain
bankruptcy matters delivered on each Issuance Date.
"Standby Liquidation System" shall mean a system by which the
Trustee will receive and store electronic information regarding Receivables from
the Servicers which may be utilized in the event of a liquidation of the
Receivables to be carried out by the Trustee, as described in Appendix B.
"State/Local Government Obligor" shall mean any state or local
government or any subdivision thereof or any agency, department, or
instrumentality thereof.
"Subordinated Interest Amount" shall have, with respect to any
Outstanding Series, the meaning specified in the related Supplement for such
Outstanding Series.
"Subordinated Company Interest" shall mean any Interest issued to
the Company pursuant to the Supplement for any Series which represents an
interest in the Trust Assets which is subordinated to the Investor Certificates
of such Series.
<PAGE>
Amended and Restated Pooling Agreement 38
"Subordinated Interest Register" shall have the meaning specified in
subsection 5.10(d).
"Subsidiary" shall mean, as to any Person, a corporation,
partnership or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person.
"Successor Master Servicer" shall have the meaning specified in
Section 6.02 of the Servicing Agreement.
"Successor Servicer" shall have the meaning specified in Section
6.02 of the Servicing Agreement.
"Supplement" shall mean, with respect to any Series, a supplement to
this Agreement complying with the terms of Section 5.10(c), executed in
conjunction with the issuance of any Series.
"Target Receivables Amount" shall have, with respect to any
Outstanding Series, the meaning specified in the related Supplement for such
Outstanding Series.
"Tax Opinion" shall mean, unless otherwise specified in the
Supplement for any Series with respect to such Series or any Class within such
Series, with respect to any action, an opinion of counsel (a) to the effect
that, for United States federal income tax purposes, (i) such action will not
adversely affect the characterization as debt of any Investor Certificates of
any Outstanding Series or Class not retained by the Company, (ii) in the case of
Section 5.10, the Investor Certificates of the new Series that are not retained
by the Company will be characterized as debt or should be characterized as debt
and if not so
<PAGE>
Amended and Restated Pooling Agreement 39
treated, will be characterized as equity interests in a partnership between the
Company and one or more Classes of the Investor Certificateholders, which
partnership will not be considered a publicly traded partnership taxable as a
corporation and (iii) following such action, the Trust will not be an
association (or publicly traded partnership) taxable as a corporation and (b)
with respect to state taxation issues regarding the taxation of the Trust, in
substantially the form delivered at the Initial Closing Date.
"Tax Sharing Agreement" shall mean the Tax Sharing Agreement, dated
August 5, 1996, among Furnishings International Inc., Lifestyle Furnishings
International Ltd., the Company and Simmons Upholstered Furniture Corporation.
"Termination Notice" shall have the meaning specified in Section
6.01 of the Servicing Agreement.
"Transactions" shall have the meaning specified in subsection
2.03(b).
"Transaction Documents" shall mean the collective reference to this
Agreement, the Servicing Agreement, each Supplement with respect to any
Outstanding Series, the Receivables Sale Agreement, the Lockbox Agreements, the
Investor Certificates, the Tax Sharing Agreement and any other documents
delivered pursuant to or in connection therewith.
"Transfer Agent and Registrar" shall have the meaning specified in
Section 5.03 and shall initially be the Trustee.
"Transfer Deposit Amount" shall have the meaning specified in
subsection 2.05(b).
"Transferred Agreements" shall have the meaning assigned in
subsection 2.01(a)(v).
<PAGE>
Amended and Restated Pooling Agreement 40
"Trust" shall mean the LFI Receivables Master Trust created by this
Agreement.
"Trust Assets" shall have the meaning specified in subsection
2.01(a).
"Trust Termination Date" shall have the meaning specified in
subsection 9.01(a).
"Trustee" shall mean the institution executing this Agreement as
trustee, or its successor in interest, or any successor trustee appointed as
herein provided.
"Trustee Force Majeure Delay" shall mean any cause or event that is
beyond the control and not due to the gross negligence of the Trustee that
delays, prevents or prohibits the Trustee's performance of its duties under
Article III, including acts of God, floods, fire, explosions of any kind,
snowstorms and other irregular weather conditions, unanticipated employee
absenteeism, mass transportation disruptions, any of power failure, telephone
failure or computer failure in the office of the Trustee, including without
limitation, failure of the Chemlink or any similar system or failure of the Fed
Wire system operated by the Federal Reserve Bank of New York and all similar
events. The Trustee shall notify the Company as soon as reasonably possible
after the beginning of any such delay.
"UCC" shall mean the Uniform Commercial Code, as amended from time
to time, as in effect in any specified jurisdiction.
"UCP 500" shall mean "The Uniform Customs and Practices for
Documentary Credits", 1993 Revision, International Chamber of Commerce
Publication No. 500.
"Variable Funding Certificates" or "VFC Certificates" shall have the
meaning specified in Section 5.10.
<PAGE>
Amended and Restated Pooling Agreement 41
SECTION 1.02. Other Definitional Provisions. (a) All terms defined
in this Agreement, the Servicing Agreement or in any Supplement shall have such
defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in Section
1.01, and accounting terms partly defined in Section 1.01 to the extent not
defined, shall have the respective meanings given to them under GAAP. To the
extent that the definitions of accounting terms herein are inconsistent with the
meanings of such terms under GAAP, the definitions contained herein shall
control.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; and Section,
subsection, Schedule, Exhibit and Appendix references contained in this
Agreement are references to Sections, subsections, Schedules, Exhibits and
Appendices in or to this Agreement unless otherwise specified.
(d) The definitions contained in Section 1.01 are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(e) Where a definition contained in Section 1.01 specifies that such
term shall have the meaning set forth in the related Supplement, the definition
of such term set forth in the related Supplement may be preceded by a prefix
indicating the specific Series or Class to which such definition shall apply.
(f) Where reference is made in this Agreement or any related
Supplement to the principal amount of
<PAGE>
Amended and Restated Pooling Agreement 42
Receivables, such reference shall, unless explicitly stated otherwise, be deemed
a reference to the Principal Amount (as such term is defined in Section 1.01) of
such Receivables.
(g) Any reference herein or in any other Transaction Document to a
provision of the Bankruptcy Code, the Internal Revenue Code or ERISA shall be
deemed a reference to any successor provision thereto.
(h) Any reference herein to a Schedule, Exhibit or Appendix to this
Agreement shall be deemed to be a reference to such Schedule, Exhibit or
Appendix as it may be amended, modified or supplemented from time to time to the
extent that such Schedule, Exhibit or Appendix 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, Exhibit or Appendix) in compliance with
the terms of the Transaction Documents.
(i) Any reference herein 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.
(j) The words "include", "includes" or "including" shall be
interpreted as if followed, in each case, by the phrase "without limitation".
<PAGE>
Amended and Restated Pooling Agreement 43
ARTICLE II
Conveyance of Receivables;
Representations, Warranties and Covenants
SECTION 2.01. Conveyance of Receivables. (a) By execution and
delivery of this Agreement, the Company does hereby assign, set over and
otherwise convey to the Trust for the benefit of the Holders, without recourse
(except as specifically provided herein), all its present and future right,
title and interest in, to and under:
(i) all Receivables, including those existing at the close of
business on the Initial Closing Date and all Receivables thereafter
arising from time to time until but not including the Trust Termination
Date;
(ii) the Related Property;
(iii) all Collections;
(iv) all rights (including rescission, replevin or reclamation)
relating to any Receivable or arising therefrom;
(v) each of the Receivables Sale Agreement and the Servicing
Agreement, including in respect of each agreement, (A) all rights of the
Company to receive monies due and to become due under or pursuant to such
agreement, whether payable as fees, expenses, costs or otherwise, (B) all
rights of the Company to receive proceeds of any insurance, indemnity,
warranty or guaranty with respect to such agreement, (C) claims of the
Company for damages arising out of or for breach of or default under such
agreement, (D) the right of the Company to amend, waive or terminate such
agreement, to perform thereunder and to compel performance and otherwise
exercise all remedies thereunder and (E) all other rights, remedies,
powers, privileges and claims of the Company under or in connection with
such
<PAGE>
Amended and Restated Pooling Agreement 44
agreement (whether arising pursuant to such agreement or otherwise
available to the Company at law or in equity), including the rights of the
Company to enforce such agreement and to give or withhold any and all
consents, requests, notices, directions, approvals, extensions or waivers
under or in connection therewith (all of the foregoing set forth in
subclauses (v)(A) through (E), inclusive, the "Transferred Agreements");
(vi) the Collection Account, each Lockbox and each Lockbox Account
(collectively, the "Accounts"), including (A) all funds and other
evidences of payment held therein and all certificates and instruments, if
any, from time to time representing or evidencing any of such Accounts or
any funds and other evidences of payment held therein, (B) all investments
of such funds held in such Accounts and all certificates and instruments
from time to time representing or evidencing such investments, (C) all
notes, certificates of deposit and other instruments from time to time
hereafter delivered or transferred to, or otherwise possessed by, the
Trustee for and on behalf of the Company in substitution for any of the
then existing Accounts and (D) all interest, dividends, cash, instruments
and other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any and all of the then
existing Accounts; and
(vii) all proceeds of or payments in respect of any and all of the
foregoing clauses (i) through (vi) (including proceeds that constitute
property of the types described in clause (vi) above and including
Collections).
Such property described in the foregoing clauses (i) through (vii), together
with all investments and all monies on deposit in any other bank account or
accounts maintained for the benefit of any Holders for payment to Holders shall
constitute the assets of the Trust (the "Trust Assets").
<PAGE>
Amended and Restated Pooling Agreement 45
Subject to Section 5.09, although it is the intent of the parties to
this Agreement that the conveyance of the Company's right, title and interest
in, to and under the Receivables and the other Trust Assets pursuant to this
Agreement shall constitute a purchase and sale and not a loan, in the event that
such conveyance is deemed to be a loan, it is the intent of the parties to this
Agreement that the Company hereby grants to the Trustee for the benefit of the
Holders a perfected first priority security interest in all of the Company's
present and future right, title and interest in, to and under the Receivables
and the other Trust Assets, and that this Agreement shall constitute a security
agreement under applicable law in favor of the Trustee, for the benefit of the
Holders.
(b) The assignment, setover and conveyance to the Trust pursuant to
Section 2.01(a) shall be made to the Trustee, on behalf of the Trust, and each
reference in this Agreement to such assignment, setover and conveyance shall be
construed accordingly. In connection with the foregoing assignment, the Company
and the Master Servicer agree to deliver to the Trustee each Trust Asset
evidencing a Receivable to be included as an Eligible Receivable or any Related
Property with respect thereto (including any original document or instrument
necessary to effect or to perfect such assignment) in which the transfer of an
interest is being perfected under the UCC or otherwise by possession and not by
filing a financing statement or similar document (although a precautionary
filing of a financing statement or similar document is expected to be made in
respect of each such Trust Asset). Without limiting the generality of the
foregoing sentence, the Company and the Master Servicer agree to deliver or
cause to be delivered to the Trustee an original of (i) any promissory note or
other instrument evidencing a Receivable sold to the Trust, (ii) any chattel
paper evidencing a Receivable sold to the Trust and (iii) each Eligible Letter
of Credit related to any Person that is to be considered an Eligible Obligor on
the basis of paragraph (a) of the definition of "Eligible Obligor".
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Amended and Restated Pooling Agreement 46
Notwithstanding the assignment of the Transferred Agreements set
forth in Section 2.01(a), the Company does not hereby assign or delegate any of
its duties or obligations under the Receivables Sale Agreement to the Trust or
the Trustee and neither the Trust nor the Trustee accepts such duties or
obligations, and the Company shall continue to have the right and the obligation
to purchase Receivables from the Sellers thereunder from time to time and to
consummate the other transactions and take any actions contemplated thereby. The
foregoing assignment, set-over and conveyance does not constitute and is not
intended to result in a creation or an assumption by the Trust, the Trustee, any
Investor Certificateholder or the Company, in its capacity as a Holder, of any
obligation of the Master Servicer, the Servicers, the Company, the Sellers or
any other Person in connection with the Receivables or under any agreement or
instrument relating thereto, including, without limitation, any obligation to
any Obligor.
In connection with such assignment, the Company agrees to record and
file, or cause to be recorded or filed, at its own expense, any financing
statements (and continuation statements with respect to such financing
statements when applicable) or, where applicable, registrations in the
appropriate records, (i) with respect to the Receivables now existing and
hereafter created and (ii) with respect to any other Trust Assets for which a
security interest may be perfected under the relevant UCC, legislation or
similar statute by such filing or registration, as the case may be, 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
assignment of the Receivables and such other Trust Assets (excluding returned
merchandise) to the Trust, and to deliver a file-stamped copy or certified
statement of such financing statement or registration or other evidence of such
filing or registration to the Trustee on or prior to the date of issuance of any
Investor Certificates, any Subordinated Company Interest or the
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Amended and Restated Pooling Agreement 47
Exchangeable Company Interest. The Trustee shall be under no obligation
whatsoever to file such financing statement, or a continuation statement to such
financing statement, or to make any other filing or other registration under the
UCC, other relevant legislation or similar statute in connection with such
transfer. The Trustee shall be entitled to conclusively rely on the filings or
registrations made by or on behalf of the Company without any independent
investigation and the Company's obligation to make such filings as evidence that
such filings have been made.
In connection with such assignment, the Company further agrees, at
its own expense, on or prior to the Initial Closing Date and each Issuance Date
(a) to indicate, or to cause to be indicated, in its computer files containing
its master database of Receivables and to cause each Seller to indicate in its
records containing its master database of Receivables that Receivables have been
conveyed to the Company or the Trust, as the case may be, pursuant to the
Receivables Sale Agreement or this Agreement, respectively, for the benefit of
the Holders and (b) to deliver or transmit or cause to be delivered or
transmitted to the Trustee computer tapes, diskettes or data transmission
containing a true and complete list of all Receivables transferred to the Trust
specifying for each such Receivable, as of the Cut-Off Date, at least (i) the
name of the Obligor and (ii) the aggregate Principal Amount of the Receivables
owing by such Obligor. Such tapes, diskettes or data transmission shall
constitute Schedule 1 to this Agreement and are hereby incorporated into and
made a part of this Agreement whether they are delivered together with or
separate from this Agreement.
SECTION 2.02. Acceptance by Trustee. (a) The Trustee hereby
acknowledges its acceptance on behalf of the Trust of all right, title and
interest in, to and under the property, now existing and hereafter created,
assigned to the Trust pursuant to Section 2.01 and declares that it shall
maintain such right, title and interest, upon the
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Amended and Restated Pooling Agreement 48
trust herein set forth, for the benefit of all Holders. The Trustee further
acknowledges that, prior to or simultaneous with the execution and delivery of
this Agreement, the Company delivered to the Trustee the computer tapes
containing a list of the Receivables described in the last paragraph of Section
2.01. The Trustee shall maintain a copy of Schedule 1, as delivered from time to
time, at the Corporate Trust Office.
(b) The Trustee shall have no power to create, assume or incur
indebtedness or other liabilities in the name of the Trust other than as
contemplated in this Agreement.
SECTION 2.03. Representations and Warranties of the Company Relating
to the Company. The Company hereby represents and warrants to the Trustee and
the Trust, for the benefit of the Holders, as of the Issuance Date of such
Series, that:
(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 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 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
to which it is or will be a party.
(b) Authorization. The execution, delivery and performance by the
Company of each of the Transaction Documents and the other transactions
contemplated hereby (collectively, the "Transactions") (i) have been duly
authorized by all requisite corporate and, if required,
<PAGE>
Amended and Restated Pooling Agreement 49
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 it 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 appropriate UCC financing statements and (ii) such as have been made
or obtained and are in full force and effect; provided, however, that with
respect to Receivables owing by Government Obligors, any failure by the Company
to comply with the United States Federal Nonassignment Act (Public Contracts),
41 U.S.C. ss. 15, or Assignment of Claims Act, 31 U.S.C. ss. 3727, or with any
similar legislation of
<PAGE>
Amended and Restated Pooling Agreement 50
any State shall not constitute a breach of this subsection 2.03(d).
(e) Litigation; Compliance with Laws. (i) There are not any actions,
suits or proceedings at law or in equity or by or before any Governmental
Authority now pending or, to the knowledge of the Company, threatened against or
affecting the Company or any business, property or rights of the Company, an
adverse decision in which could reasonably be expected to have a Company
Material Adverse Effect.
(ii) The Company is not in default with respect to any judgment,
writ, injunction, decree or order of any Governmental Authority.
(f) Agreements. (i) The Company has no Contractual Obligations other
than (A) the Transaction Documents to which it is a party (including the Seller
Note) and (B) any other agreements or instruments that the Company is not
prohibited from entering into by subsection 2.08(g) and that, in the aggregate,
neither contain payment obligations or other liabilities on the part of the
Company in excess of $50,000 nor would upon default result in a Company Material
Adverse Effect. The Company is not subject to any corporate restriction that
could reasonably be expected to have a Company Material Adverse Effect.
(ii) The Company is not in default in any material respect under any
provision of any Transaction Document or any other material Contractual
Obligation to which it is a party or by which it or any of its properties or
assets are or may be bound.
(g) Federal Reserve Regulations. (i) The Company is not engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of buying or carrying Margin Stock.
<PAGE>
Amended and Restated Pooling Agreement 51
(ii) No part of the proceeds from the issuance of any Investor
Certificates 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. Neither the Company nor the Trust is an
"investment company" as defined in, or subject to regulation under, the 1940
Act.
(i) No Early Amortization Event. No Early Amortization Event or
Potential Early Amortization Event has occurred and is continuing.
(j) Tax Returns. The Company has filed or caused to be filed all
Federal, state or other material tax returns required to have been filed by it
and has paid or caused to be paid all taxes due and payable by it and all
assessments received by it to the extent that such failure to file or nonpayment
could reasonably be expected to have a Material Adverse Effect.
(k) Location of Records; Chief Executive Office. The offices at
which the Company keeps its records concerning the Receivables either (x) are
located at the addresses set forth for the Sellers on Schedule 4 of the
Receivables Sale Agreement or (y) the Company has notified the Trustee of the
location thereof in accordance with the provisions of subsection 2.08(j) of this
Agreement. The chief executive office of the Company is located at the address
set forth on Schedule 3 and is the place where the Company 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 Initial Closing Date, the state and county where the chief
executive office of the Company is "located" for the purposes of Section
9-103(3)(d) of the UCC as in effect in the State of New York has not changed in
the past four months.
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Amended and Restated Pooling Agreement 52
(l) Solvency. No Insolvency Event with respect to the Company has
occurred and the transfer of the Receivables by the Company to the Trust has not
been made in contemplation of the occurrence thereof. Both prior to and after
giving effect to the transactions occurring on each Issuance Date, (i) the fair
value of the assets of the Company at a fair valuation will exceed the debts and
liabilities, subordinated, contingent or otherwise, of the Company; (ii) the
present fair salable value of the property of the Company will be greater than
the amount that will be required to pay the probable liability of the Company on
its debts and other liabilities, subordinated, contingent or otherwise, as such
debts and liabilities become absolute and matured; (iii) the Company will be
able to pay its debts and liabilities, subordinated, contingent or otherwise, as
such debts and liabilities become absolute and matured; and (iv) the Company
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.
The Company 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 and amounts
of cash to be payable in respect of its Indebtedness.
(m) Ownership; Subsidiaries. All of the issued and outstanding
capital stock of the Company is owned, legally and beneficially, by Lifestyle
Holdings Ltd. The Company has no Subsidiaries.
(n) Names. The legal name of the Company is as set forth in this
Agreement. The Company has no trade names, fictitious names, assumed names or
"doing business as" names.
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Amended and Restated Pooling Agreement 53
(o) Liabilities. Other than, (i) the liabilities, commitments or
obligations (whether absolute, accrued, contingent or otherwise) arising under
or in respect of the Transaction Documents and (ii) immaterial amounts due and
payable in the ordinary course of business of a special-purpose company, the
Company does not have any liabilities, commitments or obligations (whether
absolute, accrued, contingent or otherwise), whether due or to become due.
(p) Collection Procedures. The Company and the Sellers have in place
procedures pursuant to the Transaction Documents which are either necessary or
advisable to ensure the timely collection of Receivables.
(q) Lockbox Agreements; Lockbox Accounts. Except to the extent
otherwise permitted under the terms of this Agreement, (i) each Lockbox
Agreement to which the Company is party is in full force and effect and (ii)
each Lockbox Account set forth in Schedule 3 to the Receivables Sales Agreement
is free and clear of any Lien.
(r) Company Material Adverse Effect. Since the incorporation of the
Company, no event has occurred which has had a Company Material Adverse Effect.
The representations and warranties as of the date made set forth in
this Section 2.03 shall survive the transfer and assignment of the Trust Assets
to the Trust. Upon discovery by a Responsible Officer of the Company or a
Servicer or by a Responsible Officer of the Trustee of a breach of any of the
foregoing representations and warranties with respect to any Outstanding
Series as of the Issuance Date of such Series, the party discovering such breach
shall give prompt written notice to the other parties and to each Agent with
respect to all Outstanding Series. The Trustee's obligations in respect of any
breach are limited as provided in Section 8.02(g).
<PAGE>
Amended and Restated Pooling Agreement 54
SECTION 2.04. Representations and Warranties of the Company Relating
to the Receivables. The Company hereby represents and warrants to the Trustee
and the Trust, for the benefit of the Holders, with respect to each Receivable
transferred to the Trust as of the related Receivables Purchase Date, unless, in
either case, otherwise stated in the applicable Supplement or unless such
representation or warranty expressly relates only to a prior date, that:
(a) Receivables Description. As of the Cut-Off Date, Schedule 1 to
this Agreement sets forth a complete listing of all Receivables,
aggregated by Obligor, transferred to the Trust as of the Cut-Off Date and
the information contained therein specified in clauses (i) and (ii) of the
last paragraph of subsection 2.01(b) with respect to each such Receivable
is true and correct (except for any errors or omissions that do not result
in material impairment of the interests, rights or remedies of the Trustee
or the Investor Certificateholders with respect to any Receivable) as of
the Cut-Off Date. As of the Cut-Off Date, the aggregate amount of
Receivables owned by the Company is accurately set forth in Schedule 1
hereto.
(b) No Liens. Each Receivable existing on the Initial Closing Date
or, in the case of Receivables transferred to the Trust after the Initial
Closing Date, on the date that each such Receivable shall have been
transferred to the Trust, has been conveyed to the Trust free and clear of
any Lien, except for Permitted Liens.
(c) Eligible Receivable. To the Company's knowledge, on the Initial
Closing Date, each Receivable transferred to the Trust that is included in
the calculation of the initial Aggregate Receivables Amount is an Eligible
Receivable and, in the case of Receivables transferred to the Trust after
the Initial Closing Date, on the date such Receivable shall have been
transferred to the Trust, each such Receivable
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Amended and Restated Pooling Agreement 55
that is included in the calculation of the Aggregate Receivables Amount on
such date is an Eligible Receivable.
(d) Filings. On or prior to the Initial Closing 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 Trust on the Initial Closing Date a first
priority perfected ownership or security interest in respect of all
Receivables.
The representations and warranties as of the date made set forth in
this Section 2.04 shall survive the transfer and assignment of the Trust Assets
to the Trust. Upon discovery by a Responsible Officer of the Company, the Master
Servicer or a Servicer or a Responsible Officer of the Trustee of a breach of
any of the representations and warranties (or of any Receivable encompassed by
the representation and warranty in subsection 2.04(c) not being an Eligible
Receivable as of the relevant Receivables Purchase Date) with respect to each
Outstanding Series as of the Issuance Date of such Series, the party discovering
such breach shall give prompt written notice to the other parties and to each
Agent with respect to all Outstanding Series. The Trustee's obligations in
respect of any breach are limited as provided in Section 8.02(g).
SECTION 2.05. Adjustment Payment for Ineligible Receivables. (a)
Adjustment Payment Obligation. If (i) any representation or warranty under
subsections 2.04(a) or (b) is not true and correct as of the date specified
therein with respect to any Receivable transferred to the Trust or any
Receivable encompassed by the representation and warranty in subsection 2.04(c)
is determined not to be an Eligible Receivable as of the relevant Receivables
Purchase Date, (ii) there is a breach of any covenant under subsection 2.08(c)
with respect to any Receivable or (iii) the Trust's interest in any Receivable
is not a first priority perfected ownership or security interest at any
<PAGE>
Amended and Restated Pooling Agreement 56
time as a result of any action taken by, or the failure to take action by, the
Company (any Receivable as to which the conditions specified in any of clause
(i), (ii) or (iii) of this subsection 2.05(a) exists is referred to herein as an
"Ineligible Receivable") then, after the earlier (the date on which such earlier
event occurs, the "Ineligibility Determination Date"), to occur of the discovery
by the Company of any such event that continues unremedied or receipt by the
Company of written notice given by the Trustee or any Servicer of any such event
that continues unremedied, the Company shall make an adjustment payment with
respect to such Ineligible Receivable on the terms and conditions set forth in
subsection 2.05(b).
(b) Adjustment Payment Amount. Subject to the last sentence of this
subsection 2.05(b), the Company shall make an adjustment payment with respect to
each Ineligible Receivable as required pursuant to subsection 2.05(a) by
depositing in the Collection Account in immediately available funds on the
Business Day following the related Ineligibility Determination Date an amount
equal to the lesser of (x) the amount by which the Aggregate Target Receivables
Amount exceeds the Aggregate Receivables Amount (after giving effect to the
reduction thereof by the Principal Amount of such Ineligible Receivable) and (y)
the aggregate outstanding Principal Amount of all such Ineligible Receivables
(the "Transfer Deposit Amount"). Upon transfer or deposit of the Transfer
Deposit Amount, the Trust shall automatically and without further action be
deemed to have agreed to pay to the Company, without recourse, representation or
warranty, all Collections in respect of each such Ineligible Receivable. Except
as otherwise specified in any Supplement, the obligation of the Company to pay
such Transfer Deposit Amount with respect to any Ineligible Receivables shall
constitute the sole remedy respecting the event giving rise to such obligation
available to Investor Certificateholders (or the Trustee on behalf of Investor
Certificateholders).
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Amended and Restated Pooling Agreement 57
SECTION 2.06. Purchase of Investor Certificateholders' Interest in
Trust Portfolio. (a) In the event of any breach of any of the representations
and warranties set forth in paragraph (a), (b), (c), (d) or (e)(i) of Section
2.03 as of the date made, which breach has a Material Adverse Effect, then the
Trustee, at the written direction of holders evidencing more than 50% of the
Invested Amount of each affected Outstanding Series, shall notify the Company to
purchase such Outstanding Series and the Company shall be obligated to make such
purchase on the next Distribution Date occurring at least five Business Days
after receipt of such notice on the terms and conditions set forth below;
provided however, that no such purchase shall be required to be made if, by such
Distribution Date, any Material Adverse Effect caused thereby shall have been
cured.
(b) The Company shall deposit into the Collection Account for credit
to the applicable subaccount of the Collection Account on the Business Day
preceding such Distribution Date an amount equal to the purchase price (as
described in the next succeeding sentence) for the Investor Certificateholders'
Interest for such Outstanding Series on such day. The purchase price for any
such purchase will be equal to (i) the Adjusted Invested Amount of such
Outstanding Series on the date on which the purchase is made plus (ii) an amount
equal to all interest accrued but unpaid on such Series up to the Distribution
Date on which the distribution of such deposit is scheduled to be made pursuant
to Section 9.02 plus (iii) any other amount required to be paid in connection
therewith pursuant to any Supplement. Notwithstanding anything to the contrary
in this Agreement, the entire amount of the purchase price deposited in the
Collection Account shall be distributed to the related Investor
Certificateholders on such Distribution Date pursuant to Section 9.02. If the
Trustee gives notice directing the Company to purchase the Investor Certificates
of an Outstanding Series as provided above, except as otherwise specified in any
Supplement, the obligation of the Company to purchase such Investor Certificates
pursuant to
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Amended and Restated Pooling Agreement 58
this Section 2.06 shall constitute the sole remedy respecting an event of the
type specified in the first sentence of this Section 2.06 available to the
applicable Investor Certificateholders (or the Trustee on behalf of such
Investor Certificateholders).
SECTION 2.07. Affirmative Covenants of the Company. The Company
hereby covenants that, until the Trust Termination Date occurs, the Company
shall:
(a) Financial Statements, Reports, etc.
(i) Furnish to the Trustee, each Agent and the Rating
Agencies, within 90 days after the end of each fiscal year, the
balance sheet and related statements of income, stockholders' equity
and cash flows showing the financial condition of the Company as of
the close of such fiscal year and the results of its operations
during such year, all audited by the Company's Independent Public
Accountants and accompanied by an opinion of such accountants (which
shall not be qualified in any material respect) to the effect that
such financial statements fairly present the financial condition and
results of operations of the Company in accordance with GAAP
consistently applied;
(ii) Furnish to the Trustee, each Agent and the Rating Agencies,
within 45 days after the end of each of the first three fiscal
quarters of each fiscal year, the Company's balance sheet and
related statements of income, stockholders' equity and cash flows
showing the financial condition of the Company as of the close of
such fiscal quarter and the results of its operations during such
fiscal quarter and the then elapsed portion of the fiscal year (and,
beginning with the second fiscal year, showing, on a comparative
basis, such information as of and for the corresponding dates and
periods of the preceding fiscal year), all
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Amended and Restated Pooling Agreement 59
certified by a Responsible Officer of such Person as fairly
representing the financial condition and results of operations of
the Company in accordance with GAAP consistently applied, subject to
normal year-end audit adjustments; and
(iii) Furnish to the Trustee and each Agent, promptly, from time
to time, such other information regarding the operations, business
affairs and financial condition of the Company, or compliance with
the terms of any Transaction Document, in each case as any Agent or
the Trustee may reasonably request.
(b) Annual Opinion. Deliver to the Trustee and the Rating Agencies
an Opinion of Counsel substantially in the form of Exhibit B, by January
31st of each fiscal year of the Company commencing with the fiscal year
ending December 31, 1997.
(c) Payment of Obligations; Compliance with Obligations. Pay,
discharge 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 contested
in good faith by appropriate proceedings and reserves in conformity with
GAAP with respect thereto have been provided on the books of the Company
or where the failure to pay, discharge or otherwise satisfy such
obligation would not have a Company Material Adverse Effect. The Company
shall defend the right, title and interest of the Holders in, to and under
the Receivables and the other Trust Assets, whether now existing or
hereafter created, against all claims of third parties claiming through or
under the Company, the Sellers, the Master Servicer or the Servicers. The
Company will duly fulfill all material obligations on its part to be
fulfilled under or in connection with each Receivable and will do
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Amended and Restated Pooling Agreement 60
nothing to impair the rights of the Holders in such Receivable.
(d) 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 and
activities; and permit representatives of the Trustee 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 the Company's security and confidentiality requirements, and to
discuss the business, operations, properties and financial and other
condition of the Company with officers and employees of the Company and
with its Independent Public Accountants.
(e) Compliance with Law and Policies.
(i) Comply with all Requirements of Law, the provisions of the
Transaction Documents and all other material Contractual Obligations
applicable to the Company; and
(ii) Cause each of the Sellers to perform its respective
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 and the Related Property.
(f) Purchase of Receivables. Purchase Receivables solely in
accordance with the Receivables Sale Agreement or this Agreement.
(g) Delivery of Collections. In the event that the Company receives
Collections directly from
<PAGE>
Amended and Restated Pooling Agreement 61
Obligors, deliver (which may be by regular mail) or deposit such
Collections into a Lockbox, a Lockbox Account or the Collection Account
within two Business Days after its receipt thereof.
(h) Notices. Promptly (and, in any event, within two Business Days
after a Responsible Officer of the Company becomes aware of such event)
give written notice to the Trustee, each Rating Agency and each Agent for
any Outstanding Series of:
(i) the occurrence of any Early Amortization Event or
Potential Early Amortization Event; and
(ii) any Lien not permitted by subsection 2.08(c) on Receivables
accounting for 5% or more of the aggregate Principal Amount of all
Receivables in the Trust.
(i) Lockboxes. (i) Maintain, and keep in full force and effect, each
Lockbox Agreement to which the Company is a party, except to the extent
otherwise permitted under the terms of this Agreement and the other
Transaction Documents and (ii) take all reasonable actions necessary to
ensure that each related Lockbox Account shall be free and clear of, and
defend each such Lockbox Account against, any writ, order, stay, judgment,
warrant of attachment or execution or similar process; provided, however,
that, upon satisfaction of the Rating Agency Condition, the Company may
enter into any amendments or modifications of a Lockbox Agreement that the
Company reasonably deems necessary to conform such Lockbox Agreement to
the cash management system of the Company or the applicable Servicer or
Servicers.
(j) Separate Corporate Existence.
(i) Maintain its own deposit account or accounts, separate
from those of any Affiliate,
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Amended and Restated Pooling Agreement 62
with commercial banking institutions and ensure that the funds of
the Company will not be diverted to any other Person or for other
than corporate uses of the Company, nor will such funds be
commingled with the funds of any Seller or any Subsidiary or
Affiliate of any Seller;
(ii) To the extent that it shares the same officers or other
employees as any of its stockholders or Affiliates, the salaries of
and the expenses related to providing benefits to such officers and
other employees shall be fairly allocated among such entities, and
each such entity shall bear its fair share of the salary and benefit
costs associated with all such common officers and employees;
(iii) To the extent that it jointly contracts with any of its
stockholders or Affiliates to do business with vendors or service
providers or to share overhead expenses, the costs incurred in so
doing shall be allocated fairly among such entities, and each such
entity shall bear its fair share of such costs. To the extent that
the Company contracts or does business with vendors or service
providers where the goods and services provided are partially for
the benefit of any other Person, the costs incurred in so doing
shall be fairly allocated to or among such entities for whose
benefit the goods or services are provided, and each such entity
shall bear its fair share of such costs. All material transactions
between the Company and any of its Affiliates, 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
each Seller and its Affiliates (but which may be located at the same
address as one of the Sellers or one of the Sellers'
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Amended and Restated Pooling Agreement 63
Affiliates). To the extent that the Company and any of its
stockholders or Affiliates have offices in the same location, there
shall be a fair and appropriate allocation of overhead costs among
them, and each such entity shall bear its fair share of such
expenses;
(v) Issue separate financial statements prepared not less
frequently than quarterly and prepared in accordance with GAAP;
(vi) Conduct its affairs strictly in accordance with its
articles of incorporation and observe all necessary, appropriate and
customary corporate formalities, including, but not limited to,
holding all regular and special stockholders' and directors'
meetings appropriate to authorize all corporate action, keeping
separate and accurate minutes of its meetings, passing all
resolutions or consents necessary to authorize actions taken or to
be taken, and maintaining accurate and separate books, records and
accounts, including, but not limited to, payroll and intercompany
transaction accounts;
(vii) Not assume or guarantee any of the liabilities of any
Seller, any Servicer or any Affiliate thereof; and
(viii) 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 to (x) 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) comply with those
procedures described in such provisions which are applicable to the
Company.
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Amended and Restated Pooling Agreement 64
(k) 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 such
qualification is required other than any jurisdiction where the failure so
to qualify would not have a Company Material Adverse Effect.
(1) Assessments. Promptly pay and discharge all taxes, assessments,
levies and other governmental charges imposed on it except such taxes,
assessments, levies and other governmental charges that (i) are being
contested in good faith by appropriate proceedings and for which the
Company shall have set aside on its books adequate reserves and (ii) the
failure to pay, satisfy or discharge would not, in any event, result in a
Company Material Adverse Effect.
(m) Net Worth. On the Initial Closing Date have a consolidated
common stockholders' equity, and thereafter maintain at all times a net
worth, of at least $33,000,000.
SECTION 2.08. Negative Covenants of the Company. The Company hereby
covenants that, until the Trust Termination Date occurs, it shall not directly
or indirectly:
(a) Limitation on Liabilities. Create, incur, assume or suffer to
exist any Indebtedness, except Indebtedness evidenced by the Seller Note;
or incur any liability or obligation other than (i) liabilities or
obligations representing fees, expenses and indemnities payable pursuant
to and in accordance with the Transaction Documents and (ii) liabilities
or obligations for services supplied or furnished to the Company in an
amount not to exceed $50,000 at any time outstanding.
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Amended and Restated Pooling Agreement 65
(b) Limitation 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 except in respect of or in connection with
(A) the purchase of Receivables and Related Property from the Seller
or its Subsidiaries, (B) an advance or loan made to a Seller or (C)
investments of proceeds as contemplated in any Pooling and Servicing
Agreement.
(c) Limitation on Guarantee Obligations. Become or remain liable,
directly or contingently, in connection with any Indebtedness or other
liability of any other Person, whether by guarantee, endorsement (other
than endorsements of negotiable instruments for deposit or collection in
the ordinary course of business), agreement to purchase or repurchase,
agreement to supply or advance funds, or otherwise other than under or in
connection with any Pooling and Servicing Agreement.
(d) 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.
(e) Business of the Company. Engage at any time in any business or
business activity other than the acquisition of Receivables pursuant to
the Receivables
<PAGE>
Amended and Restated Pooling Agreement 66
Sale Agreement, the assignments and transfers hereunder, the other
transactions contemplated by the Transaction Documents or any Pooling and
Servicing Agreement and the holding of the LHL Demand Note, and any
activity incidental to the foregoing and necessary or convenient to
accomplish the foregoing, or enter into or be a party to any agreement or
instrument other than in connection with the foregoing.
(f) Agreements. (i) Become a party to any indenture, mortgage,
instrument, contract, agreement, lease or other undertaking, except the
Transaction Documents, leases of office space, equipment or other
facilities for use by the Company in its ordinary course of business,
employment agreements, service agreements, agreements relating to shared
employees and the other Transaction Documents or any Pooling and Servicing
Agreement and agreements necessary to perform its obligations under the
Transaction Documents or any Pooling and Servicing Agreement, (ii) issue
any power of attorney (except to the Trustee, the Master Servicer or the
Servicers or except for the purpose of permitting any Person to perform
any ministerial functions on behalf of the Company that are not prohibited
by or inconsistent with the terms of the Transaction Documents or any
Pooling and Servicing Agreement), or (iii) amend, supplement, modify or
waive any of the provisions of the Receivables Sale Agreement or any
Lockbox Agreement or request, consent or agree to or suffer to exist or
permit any such amendment, supplement, modification or waiver or exercise
any consent rights granted to it thereunder unless such amendment,
supplement, modification or waiver or such exercise of consent rights
would not have an adverse effect on the interests, rights or remedies of
the Trustee or the Investor Certificateholders of any Outstanding Series
under or with respect to the Transaction Documents and the Rating Agency
Condition shall have been satisfied with respect to any such amendments,
supplements, modifications or waivers.
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Amended and Restated Pooling Agreement 67
(g) 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.
(h) Receivables Not To Be Evidenced by Promissory Notes. Subject to
the delivery requirement set forth in subsection 2.01(b), take any action
to cause any Receivable not evidenced by an "instrument" (as defined in
the UCC as in effect in any state in which the Company's, or the related
Sellers' chief executive offices or books and records relating to such
Receivable are located) upon origination to become evidenced by an
instrument, except in connection with its enforcement or collection of a
Defaulted Receivable.
(i) Offices. Move the location of its chief executive office or of
any of the offices where it keeps its records with respect to the
Receivables, or its legal head office to a new location within or outside
the state where such office is now located, without (i) 30 days prior
written notice to the Trustee and each Rating Agency and (ii) taking all
actions reasonably requested by the Trustee (including but not limited to
all filings and other acts necessary or advisable under the UCC or similar
statute of each relevant jurisdiction) in order to continue the Trust's
first priority perfected ownership or security interest
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Amended and Restated Pooling Agreement 68
in all Receivables now owned or hereafter created; provided, however, that
the Company shall not change the location of its chief executive office 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.
(j) Change in Name. Change its name, identity or corporate structure
in any manner that would or is likely (i) to 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 (ii) to impair the perfection of the Trust's interest in any
Receivable under any other similar law, without 30 days prior written
notice to the Trustee and each Rating Agency.
(k) Charter. Amend or make any change or modification to its
certificate of incorporation without first satisfying the Rating Agency
Condition (other than an amendment, change or modification made pursuant
to changes in law of the state of its incorporation or amendments to
change the Company's name (subject to compliance with clause (k) above),
registered agent or address of registered office).
(l) Addition of Sellers. Agree to the addition of any additional
Seller pursuant to subsection 9.12 of the Receivables Sale Agreement
unless such additional Seller shall have been simultaneously added as a
Servicer party to the Servicing Agreement pursuant to Section 7.04 thereof
or another Servicer has simultaneously agreed to service the Receivables
originated by such additional Seller.
(m) Optional Termination of Seller. Designate any Seller as a Seller
to be terminated as a Seller
<PAGE>
Amended and Restated Pooling Agreement 69
pursuant to subsection 9.13(b) of the Receivables Sale Agreement unless,
if such Seller is a Servicer, such Seller shall have been terminated as a
Servicer pursuant to Section 6.04 of the Servicing Agreement.
(n) Limitation on Restricted Payments and Payments on Seller Note.
Declare or pay any dividend on, or make any payment on account of, or set
apart assets for a sinking or other analogous fund for, the purchase,
redemption, defeasance, retirement or other acquisition of, any shares of
any class of capital stock of the Company, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either
directly or indirectly, whether in cash or property or in obligations of
the Company (such declarations, payments, setting apart, purchases,
redemptions, defeasances, retirements, acquisitions and distributions
being herein called "Restricted Payments"), or make, directly or
indirectly, payments in any form in respect of the Seller Note except, in
either case, in accordance with the terms of any Pooling and Servicing
Agreement.
ARTICLE III
Rights of Holders and
Allocation and Application of Collections
THE FOLLOWING PORTION OF THIS ARTICLE III
IS APPLICABLE TO ALL SERIES.
SECTION 3.01. Establishment of Collection Account; Certain
Allocations. (a) The Trustee, for the benefit of the Holders, as their interests
appear in this Agreement, shall cause to be established and maintained in the
name of the Trust with an Eligible Institution or with the corporate trust
department of the Trustee or an Eligible Institution or an affiliate of the
Trustee or an Eligible Institution, a segregated trust account (the "Collection
<PAGE>
Amended and Restated Pooling Agreement 70
Account"), bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Holders. Schedule 2, which is hereby
incorporated into and made a part of this Agreement, identifies the Collection
Account by setting forth the account number of such account, the account
designation of such account and the name of the institution with which such
account has been established. The Collection Account shall be divided into
individual subaccounts for each Outstanding Series (each, respectively, a
"Series Collection Subaccount" and, collectively, the "Series Collection
Subaccounts") and for the Company (the "Company Collection Subaccount"). For
administrative purposes only, the Trustee shall establish or cause to be
established for each Series, so long as such Series is an Outstanding Series,
sub-subaccounts of the Series Collection Subaccounts with respect to such Series
(respectively, the "Series Principal Collection Sub-subaccount" and "Series
Non-Principal Collection Sub-subaccount" and, collectively, the "Series
Collection Sub-subaccounts").
(b) Authority of the Trustee in Respect of the Collection Account.
(i) The Trustee shall possess all right, title and interest in all funds on
deposit from time to time in the Collection Account and in all proceeds thereof.
The Collection Account shall be under the sole dominion and control of the
Trustee for the benefit of the Holders. If, at any time, the Master Servicer or
any Servicer has actual notice or knowledge that any institution holding the
Collection Account has ceased to be an Eligible Institution, any such Servicer
shall immediately notify the Master Servicer and the Master Servicer shall
direct the Trustee to establish within 30 days a substitute account therefor
with an Eligible Institution, transfer any cash and/or any Eligible Investments
to such new account and from the date any such substitute accounts are
established, such account shall be the Collection Account. Neither the Company,
the Master Servicer nor any Servicer, nor any person or entity claiming by,
through or under the Company, the Master Servicer or any Servicer, shall have
any right, title or interest in, except to the extent expressly
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Amended and Restated Pooling Agreement 71
provided under the Transaction Documents, or any right to withdraw any amount
from, the Collection Account. Pursuant to the authority granted to the Servicers
in subsection 2.02(a) of the Servicing Agreement, each Servicer shall have the
power to instruct the Trustee in writing to make withdrawals from and payments
to the Collection Account for the purposes of carrying out the Master
Servicer's, the Servicers' or Trustee's duties hereunder.
(ii) The Master Servicer agrees to give written direction (which may
be included within any Daily Report) in a timely manner to the Trustee to apply
all Collections with respect to the Receivables and to make all other
applications, allocations and distributions described in Article III and in the
Supplement with respect to each Outstanding Series.
(iii) Each Series of Investor Certificates shall represent
Fractional Undivided Interests as indicated in the Supplement relating to such
Series and the right to receive Collections and other amounts at the times and
in the amounts specified in this Article III (as supplemented by the Supplement
related to such Series) to be deposited in the Collection Account and any other
accounts maintained for the benefit of the Investor Certificateholders or paid
to the Investor Certificateholders (with respect to each outstanding Series, the
"Investor Certificateholders' Interest"). The Exchangeable Company Interest
shall represent the interest in the Trust not represented by any Series of
Investor Certificates or Subordinated Company Interest then outstanding,
including the right to receive Collections and other amounts at the times and in
the amounts specified in this Article III to be paid to the Company (the
"Exchangeable Company Interest"), and each Subordinated Company Interest, if
any, shall represent the interests granted to such Subordinated Company Interest
pursuant to the related Supplement; provided, however, that no such Subordinated
Company Interest shall represent any interest in any Trust Account and any other
accounts maintained for the benefit of the Investor
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Amended and Restated Pooling Agreement 72
Certificateholders, except as specifically provided in this Article III.
(c) Administration of the Collection Account. At the written
direction of the Company, funds on deposit in the Collection Account available
for investment, shall be invested by the Trustee in Eligible Investments
selected by the Company. All such Eligible Investments shall be held by the
Trustee for the benefit of the Investor Certificateholders. Amounts on deposit
in each Series Non-Principal Collection Sub-subaccount shall, if applicable, be
invested in Eligible Investments that will mature, or that are payable or
redeemable upon demand of the holder thereof, so that such funds will be
available on or before the Business Day immediately preceding the next
Distribution Date. None of such Eligible Investments shall be disposed of prior
to the maturity date with respect thereto unless such disposition is reasonably
determined by the Company to be necessary to prevent a loss. All interest and
investment earnings (net of losses and investment expenses) on funds deposited
in a Series Non-Principal Collection Sub-subaccount shall be deposited in such
sub-subaccount. Amounts on deposit in the Series Principal Collection Sub-
subaccount and any other sub-subaccounts as specified in the related Supplement
shall be invested in Eligible Investments that mature, or that are payable or
redeemable upon demand of the holder thereof, so that such funds will be
available not later than the date which is specified in any Supplement. The
Trustee, or its nominee or custodian, shall maintain possession of the
negotiable instruments or securities, if any, evidencing any Eligible
Investments from the time of purchase thereof until the time of sale or
maturity. Any earnings (net of losses and investment expenses) (the "Investment
Earnings") on such invested funds in a Series Principal Collection
Sub-subaccount and any other sub-subaccounts as specified in the related
Supplement will be deposited by the Trustee in the related Series Non-Principal
Collection Sub-subaccount.
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Amended and Restated Pooling Agreement 73
(d) Daily Collections. (i) Promptly following its receipt of
Collections in the form of available funds in a Lockbox Account, but in no event
later than 1:30 p.m., New York City time, on the Business Day following the
Business Day Received, the related Servicer shall transfer, or cause to be
transferred, all Collections on deposit (less the aggregate amount of set-offs
permitted to be retained pursuant to any applicable Lockbox Agreement) in the
form of available funds in the Lockbox Accounts directly to the Collection
Account.
(ii) If the Aggregate Daily Collections are deposited into the
Collection Account pursuant to the preceding subsection 3.01(d)(i) at or before
1:00 p.m., New York City time, and the Daily Report specified in subsection
3.01(b)(ii) is received by the Trustee at or before 1:00 p.m., New York City
time, the Trustee shall transfer, within a reasonable time, on such Business
Day, from such Aggregate Daily Collections, to the respective Series Collection
Subaccount, an amount equal to the product of (x) the applicable Invested
Percentage for such Outstanding Series and (y) such Aggregate Daily Collections
in accordance with the Daily Report.
(iii) If the Aggregate Daily Collections are deposited into the
Collection Account at or before 1:00 p.m., New York City time, and the Daily
Report is received by the Trustee at or before 1:00 p.m., New York City time, as
set forth in the preceding subsection 3.01(d)(ii), the Trustee shall allocate,
within a reasonable time, on such Business Day, funds transferred to the Series
Collection Subaccount for each Outstanding Series pursuant to the preceding
subsection 3.01(d)(ii) to the Series Non-Principal Collection Sub-subaccount and
the Series Principal Collection Sub-subaccount of each such Series in accordance
with the Daily Report and the related Supplement for such Series.
(iv) Except as otherwise provided in a Supplement, if the Aggregate
Daily Collections are deposited into the
<PAGE>
Amended and Restated Pooling Agreement 74
Collection Account at or before 1:00 p.m., New York City time, and the Daily
Report is received by the Trustee at or before 1:00 p.m., New York City time, as
set forth in subsection 3.01(d)(ii), the Trustee shall, in accordance with the
Daily Report, transfer, within a reasonable time, on such Business Day, to the
Company Collection Subaccount the remaining funds, if any, on deposit in the
Collection Account on such day after giving effect to transfers to be made
pursuant to subsection 3.01(d)(ii).
(e) Certain Allocations Following an Amortization Period. (i) If, on
any Settlement Report Date, an Amortization Period has occurred and is
continuing with respect to any Outstanding Series and at such Settlement Report
Date, a Revolving Period is still in effect with respect to any other
Outstanding Series (a "Special Allocation Settlement Report Date"), then the
Master Servicer shall make the following calculations:
(A) the amount (the "Allocable Charged-Off Amount") equal to the
excess, if any, of (I) the aggregate Principal Amount of
Charged-Off Receivables for the related Settlement Period over
(II) the aggregate Principal Amount of Recoveries received
during the related Settlement Period;
(B) the amount (the "Allocable Recoveries Amount") equal to the
excess, if any, of (I) the aggregate Principal Amount of
Recoveries received during the related Settlement Period over
(II) the aggregate Principal Amount of Charged-Off Receivables
for the related Settlement Period; and
(ii) If, on any Special Allocation Settlement Report Date, either of
the Allocable Charged-off Amount or the Allocable Recoveries Amount is greater
than zero for the related Settlement Period, the Trustee shall (in accordance
with written directions received pursuant to subsection (b)(ii) above) make (A)
a pro rata allocation to each Outstanding Series (based on the Invested
Percentage for such Series) of
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Amended and Restated Pooling Agreement 75
a portion (as determined in clause (iii) below) of each such positive amount and
(B) an allocation to the Exchangeable Company Interest of the remaining portion
of each such positive amount.
(iii) With respect to each portion of the Allocable Charged-off
Amount and the Allocable Recoveries Amount which is allocated to an Outstanding
Series pursuant to subsection 3.01(e)(ii), the Trustee shall (in accordance with
the written direction of the Master Servicer) apply each such amount to such
Series in accordance with the related Supplement for such Series.
(f) Allocations for the Exchangeable Company Interest. Until the
occurrence and continuation of an Early Amortization Period, on each Business
Day and, after the occurrence and continuation of an Early Amortization Period
and until the Trust Termination Date, on each Distribution Date, after making
all allocations required pursuant to subsection 3.01(d), the Trustee shall (in
accordance with the written direction of the Master Servicer) transfer, using
its best efforts to transfer within two hours of receipt of the Aggregate Daily
Collections and the Daily Report and, if the Aggregate Daily Collections and the
Daily Report are received by the Trustee no later than 1:00 p.m., New York City
time, making such transfer no later than 3:00 p.m., New York City time, on such
Business Day, the amounts on deposit in the Company Collection Subaccount to the
holder of the Exchangeable Company Interest or to such accounts or such Persons
as the holder of the Exchangeable Company Interest may direct in writing (which
direction may consist of standing instructions provided by the holder of the
Exchangeable Company Interest that shall remain in effect until changed by the
holder of the Exchangeable Company Interest in writing); provided, however, that
a transfer for purposes of this subsection 3.01(f) shall be deemed to have
occurred at such time as the Trustee instructs the Federal Reserve Bank of New
York of the outgoing amount; provided further that a failure of the Trustee to
transfer funds by 3:00 p.m., New York City time,
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Amended and Restated Pooling Agreement 76
shall not be a breach of this subsection 3.01(f) if (i) Chemlink or a similar
program is not used by both the Company and the Trustee to make such transfers
or (ii) a Trustee Force Majeure Delay occurs, and in either such event the
Trustee shall use its best efforts to transfer funds within a reasonable time.
(g) Setoff. In addition to the provisions of Section 8.05, (i) if
the Company shall fail to make a payment as provided in this Agreement or any
Supplement, the Master Servicer or the Trustee may set off and apply any amounts
otherwise payable to the Company under any Pooling and Servicing Agreement. The
Company hereby waives demand, notice or declaration of such setoff and
application; provided that notice will promptly be given to the Company of such
setoff and application; provided further that failure to give such notice shall
not affect the validity of such setoff; and (ii) in the event any Servicer shall
fail to make a payment as provided in any Pooling and Servicing Agreement, the
Trustee may set off and apply any amounts otherwise payable to such Servicer in
its capacity as Servicer under the Transaction Documents on account of such
obligation. Each Servicer hereby waives demand, notice or declaration of such
setoff and application; provided that notice will promptly be given to such
Servicer of such setoff; provided further that failure to give such notice shall
not affect the validity of such setoff.
(h) Allocation and Application of Funds. The Master Servicer shall
direct the Trustee in writing (which may be given in the form of the Daily
Reports and the Monthly Settlement Statements) to apply all Collections with
respect to the Receivables as described in this Article III and in the
Supplement with respect to each Outstanding Series. The Master Servicer shall
direct the Trustee in writing to pay Collections to the holder of the
Exchangeable Company Interest to the extent such Collections are allocated to
the Exchangeable Company Interest under subsection 3.01(f) and as otherwise
provided in Article III. Unless otherwise provided in one or more Supplement, if
the
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Amended and Restated Pooling Agreement 77
Trustee receives any Daily Report at or before 1:00 p.m., New York City time, on
any Business Day, the Trustee shall make any applications of funds required
thereby on the same Business Day and otherwise on the next succeeding Business
Day.
THE REMAINDER OF ARTICLE III SHALL BE SPECIFIED
IN THE SUPPLEMENT WITH RESPECT TO EACH SERIES.
SUCH REMAINDER SHALL BE APPLICABLE ONLY TO THE
SERIES RELATING TO THE SUPPLEMENT IN WHICH
SUCH REMAINDER APPEARS.
ARTICLE IV
ARTICLE IV IS RESERVED
AND MAY BE SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO THE SERIES RELATING THERETO.
ARTICLE V
The Investor Certificates and
Exchangeable Company Interest
SECTION 5.01. The Investor Certificates. The Investor Certificates
of each Series and any Class thereof shall be in fully registered form and shall
be substantially in the form of the exhibits with respect thereto attached to
the applicable Supplement. The Investor Certificates shall, upon issue, be
executed and delivered by the Company to the Trustee for authentication and
redelivery as provided in Section 5.02. Except as otherwise set forth as to any
Series or Class in the related Supplement, the Investor Certificates shall be
issued in minimum denominations of $500,000 and in integral multiples of
$100,000 in excess thereof. Unless otherwise specified in any Supplement for any
Series, the Investor Certificates shall be issued upon initial issuance as a
single global certificate in an
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Amended and Restated Pooling Agreement 78
original principal amount equal to the Initial Invested Amount with respect to
such Series. The Company is hereby authorized to execute and deliver each
Investor Certificate and any documents related thereto on behalf of the Trust.
Each Investor Certificate shall be executed by manual or facsimile signature on
behalf of the Company by a Responsible Officer. Investor Certificates bearing
the manual or facsimile signature of the individual who was, at the time when
such signature was affixed, authorized to sign on behalf of the Company or the
Trustee shall not be rendered invalid, notwithstanding that such individual has
ceased to be so authorized prior to or on the date of the authentication and
delivery of such Investor Certificates or does not hold such office at the date
of such Investor Certificates. No Investor Certificate shall be entitled to any
benefit under this Agreement, or be valid for any purpose, unless there appears
on such Investor Certificate a certificate of authentication substantially in
the form provided for herein executed by or on behalf of the Trustee by the
manual signature of a duly authorized signatory, and such certificate of
authentication upon any Investor Certificate shall be conclusive evidence, and
the only evidence, that such Investor Certificate has been duly authenticated
and delivered hereunder. All Investor Certificates shall be dated the date of
their authentication but failure to do so shall not render them invalid.
SECTION 5.02. Authentication of Investor Certificates. The Trustee
shall authenticate and deliver the initial Series of Investor Certificates that
is issued upon the written order of the Company in a form reasonably
satisfactory to the Trustee, to the holders of the initial Series of Investor
Certificates, against payment to the Company of the Initial Invested Amount. The
Investor Certificates shall be duly authenticated by or on behalf of the Trustee
in authorized denominations equal to (in the aggregate) the Initial Invested
Amount. Upon a Company Exchange as provided in Section 5.10 and the satisfaction
of certain other conditions specified therein, the Trustee shall authenticate
and deliver the Investor Certificates of
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Amended and Restated Pooling Agreement 79
additional Series (with the designation provided in the applicable Supplement)
(or, if provided in any Supplement, the additional Investor Certificates of an
existing Series), upon the written order of the Company, to the Persons
designated in such Supplement. Upon the written order of the Company, the
Investor Certificates of any Series shall be duly authenticated by or on behalf
of the Trustee, in authorized denominations equal to (in the aggregate) the
Initial Invested Amount of such Series of Investor Certificates.
SECTION 5.03. Registration of Transfer and Exchange of Investor
Certificates. (a) The Trustee shall cause to be kept at the office or agency to
be maintained by a transfer agent and registrar (which may be the Trustee) (the
"Transfer Agent and Registrar") in accordance with the provisions of Section
8.16 a register (the "Certificate Register") in which, subject to such
reasonable regulations as the Trustee may prescribe, the Transfer Agent and
Registrar shall provide for the registration of the Investor Certificates and of
transfers and exchanges of the Investor Certificates as herein provided. The
Company hereby appoints The Chase Manhattan Bank as Transfer Agent and Registrar
for the purpose of registering the Investor Certificates and transfers and
exchanges of the Investor Certificates as herein provided. The Chase Manhattan
Bank shall be permitted to resign as Transfer Agent and Registrar upon 30 days
prior written notice to the Company, the Trustee and the Master Servicer;
provided, however, that such resignation shall not be effective and The Chase
Manhattan Bank shall continue to perform its duties as Transfer Agent and
Registrar until the Trustee has appointed a successor Transfer Agent and
Registrar reasonably acceptable to the Company and such successor Transfer Agent
and Registrar has accepted such appointment. The provisions of Sections 8.01,
8.02, 8.03, 8.05 and 10.19 shall apply to The Chase Manhattan Bank (or the
Trustee to the extent it is so acting) also in its role as Transfer Agent or
Registrar, as the case may be, for so long as The Chase Manhattan Bank
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Amended and Restated Pooling Agreement 80
(or the Trustee to the extent it is so acting) shall act as Transfer Agent or
Registrar, as the case may be.
The Company hereby agrees to provide the Trustee from time to time
sufficient funds, on a timely basis and in accordance with and subject to
Section 8.05, for the payment of any reasonable compensation payable to the
Transfer Agent and Registrar for its services under this Section 5.03 and under
Section 5.10. The Trustee hereby agrees that, upon the receipt of such funds
from the Company, it shall pay the Transfer Agent and Registrar such amounts.
Upon surrender for registration of transfer of any Investor
Certificate at any office or agency of the Transfer Agent and Registrar
maintained for such purpose, the Company shall execute, and the Trustee shall,
upon the written order of the Company, authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Investor Certificates
in authorized denominations of the same Series representing like aggregate
Fractional Undivided Interests and which bear numbers that are not
contemporaneously outstanding.
At the option of an Investor Certificateholder, Investor
Certificates may be exchanged for other Investor Certificates of the same Series
in authorized denominations of like aggregate Fractional Undivided Interests,
bearing numbers that are not contemporaneously outstanding, upon surrender of
the Investor Certificates to be exchanged at any such office or agency of the
Transfer Agent and Registrar maintained for such purpose.
Whenever any Investor Certificates of any Series are so surrendered
for exchange, the Company shall execute, and the Trustee shall, upon the written
order of the Company, authenticate and (unless the Transfer Agent and Registrar
is different from the Trustee, in which case the Transfer Agent and Registrar
shall) deliver, the Investor Certificates of such Series which the Investor
Certificateholder making the exchange is entitled to
<PAGE>
Amended and Restated Pooling Agreement 81
receive. Every Investor Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer,
with sufficient instructions, duly executed by the Investor Certificateholder
thereof or his attorney-in-fact duly authorized in writing delivered to the
Trustee (unless the Transfer Agent and Registrar is different from the Trustee,
in which case to the Transfer Agent and Registrar) and complying with any
requirements set forth in the applicable Supplement.
No service charge shall be made for any registration of transfer or
exchange of Investor Certificates, but the Transfer Agent and Registrar may
require any Investor Certificateholder that is transferring or exchanging one or
more Investor Certificates to pay a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Investor Certificates.
All Investor Certificates surrendered for registration of transfer
and exchange shall be canceled and disposed of in a customary manner
satisfactory to the Trustee.
The Company shall execute and deliver Investor Certificates to the
Trustee or the Transfer Agent and Registrar in such amounts and at such times as
are necessary to enable the Trustee and the Transfer Agent and Registrar to
fulfill their respective responsibilities under this Agreement and the Investor
Certificates.
(b) The Transfer Agent and Registrar will maintain at its expense in
the Borough of Manhattan, The City of New York and, subject to subsection
5.03(a), if specified in the related Supplement for any Series, any other city
designated in such Supplement, an office or offices or agency or agencies where
Investor Certificates may be surrendered for registration or transfer or
exchange.
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Amended and Restated Pooling Agreement 82
(c) Unless otherwise stated in any related Supplement, registration
of transfer of Investor Certificates containing a legend relating to
restrictions on transfer of such Investor Certificates (which legend shall be
set forth in the Supplement relating to such Investor Certificates) shall be
effected only if the conditions set forth in the related Supplement are complied
with.
Investor Certificates issued upon registration or transfer of, or in
exchange for, Investor Certificates bearing the legend referred to above shall
also bear such legend unless the Company, the Master Servicer, the Trustee and
the Transfer Agent and Registrar receive an Opinion of Counsel satisfactory to
each of them, to the effect that such legend may be removed.
SECTION 5.04. Mutilated, Destroyed, Lost or Stolen Investor
Certificates. If (a) any mutilated Investor Certificate is surrendered to the
Transfer Agent and Registrar, or the Transfer Agent and Registrar receives
evidence to its satisfaction of the destruction, loss or theft of any Investor
Certificate and (b) there is delivered to the Transfer Agent and Registrar and
the Trustee such security or indemnity as may be required by them to save the
Trust, each of them and the Company harmless, then, in the absence of actual
notice to the Trustee or Transfer Agent and Registrar that such Investor
Certificate has been acquired by a bona fide purchaser, the Company shall
execute and, upon the written request of the Company, the Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Investor Certificate, a new Investor Certificate of
like tenor and aggregate Fractional Undivided Interest and bearing a number that
is not contemporaneously outstanding. In connection with the issuance of any new
Investor Certificate under this Section 5.04, the Trustee or the Transfer Agent
and Registrar may require the payment by the Investor Certificateholder of a sum
sufficient to cover any tax or other governmental expenses (including the fees
and expenses of the Trustee and Transfer Agent and Registrar) connected
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Amended and Restated Pooling Agreement 83
therewith. Any duplicate Investor Certificate issued pursuant to this Section
5.04 shall constitute complete and indefeasible evidence of ownership in the
Trust, as if originally issued, whether or not the lost, stolen or destroyed
Investor Certificate shall be found at any time.
SECTION 5.05. Persons Deemed Owners. At all times prior to due
presentation of an Investor Certificate for registration of transfer, the
Company, the Trustee, the Paying Agent, the Transfer Agent and Registrar, any
Agent and any agent of any of them may treat the Person in whose name any
Investor Certificate is registered as the owner of such Investor Certificate for
the purpose of receiving distributions pursuant to Article IV of the related
Supplement and for all other purposes whatsoever, and neither the Trustee, the
Paying Agent, the Transfer Agent and Registrar nor any agent of any of them
shall be affected by any notice to the contrary. Notwithstanding the foregoing
provisions of this Section 5.05, in determining whether the Investor
Certificateholders of the requisite Fractional Undivided Interests have given
any request, demand, authorization, direction, notice, consent or waiver
hereunder, Investor Certificates owned by the Company, the Master Servicer or
any Servicer or any Affiliate thereof, shall be disregarded and deemed not to be
outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Investor Certificates which a Responsible Officer of the
Trustee actually knows to be so owned shall be so disregarded. Investor
Certificates so owned by the Company, the Master Servicer or any Servicer or any
Affiliate thereof which have been pledged in good faith shall not be disregarded
and may be regarded as outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Investor Certificates and that the pledgee is not the Company, the Master
Servicer or any Servicer or any Affiliate thereof.
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Amended and Restated Pooling Agreement 84
SECTION 5.06. Appointment of Paying Agent. The Paying Agent shall
make distributions to Investor Certificateholders from the Collection Account
(and/or any other account or accounts maintained for the benefit of Investor
Certificateholders as specified in the related Supplement for any Series)
pursuant to Articles III and IV. The Trustee may revoke such power and remove
the Paying Agent if the Trustee determines in its sole discretion that the
Paying Agent shall have failed to perform its obligations under this Agreement
in any material respect. Unless otherwise specified in the related Supplement
for any Series and with respect to such Series, the Paying Agent shall initially
be The Chase Manhattan Bank and any co-paying agent chosen by The Chase
Manhattan Bank. Each Paying Agent shall have a combined capital and surplus of
at least $50,000,000. The Paying Agent shall be permitted to resign upon 30 days
prior written notice to the Trustee. In the event that the Paying Agent shall so
resign, the Trustee shall appoint a successor to act as Paying Agent (which
shall be a depositary institution or trust company) reasonably acceptable to the
Company which appointment shall be effective on the date on which the Person so
appointed gives the Trustee written notice that it accepts the appointment. Any
resignation or removal of the Paying Agent and appointment of successor Paying
Agent pursuant to this Section 5.06 shall not become effective until acceptance
of appointment by the successor Paying Agent, as provided in this Section 5.06.
The Trustee shall cause such successor Paying Agent or any additional Paying
Agent appointed by the Trustee to execute and deliver to the Trustee an
instrument in which such successor Paying Agent or additional Paying Agent shall
agree with the Trustee that as Paying Agent, such successor Paying Agent or
additional Paying Agent will hold all sums, if any, held by it for payment to
the Investor Certificateholders in trust for the benefit of the Investor
Certificateholders entitled thereto until such sums shall be paid to such
Investor Certificateholders. The Paying Agent shall return all unclaimed funds
to the Trustee and upon removal of a Paying Agent such Paying Agent shall also
return all funds in its possession to the Trustee. The
<PAGE>
Amended and Restated Pooling Agreement 85
provisions of Sections 8.01, 8.02, 8.03, 8.05 and 10.19 shall apply to The Chase
Manhattan Bank (or the Trustee to the extent it is so acting) also in its role
as Paying Agent, for so long as The Chase Manhattan Bank (or the Trustee to the
extent it is so acting) shall act as Paying Agent. Any reference in this
Agreement to the Paying Agent shall include any co-paying agent unless the
context requires otherwise.
The Company hereby agrees to provide the Trustee from time to time
sufficient funds, on a timely basis and in accordance with and subject to
Section 8.05, for the payment of any reasonable compensation payable to the
Paying Agent for its services under this Section 5.06. The Trustee hereby agrees
that, upon the receipt of such funds from the Company, it shall pay the Paying
Agent such amounts.
SECTION 5.07. Access to List of Investor Certificateholders' Names
and Addresses. The Trustee will furnish or cause to be furnished by the Transfer
Agent and Registrar to the Company, the Master Servicer or the Paying Agent,
within 10 Business Days after receipt by the Trustee of a request therefor from
the Company, the Master Servicer or the Paying Agent, respectively, in writing,
a list of the names and addresses of the Investor Certificateholders as then
recorded by or on behalf of the Trustee. The costs and expenses incurred in
connection with the provision of such list shall constitute Program Costs under
the Supplement for the applicable Series. If three or more Investor
Certificateholders of record or any Investor Certificateholder of any Series or
a group of Investor Certificateholders of record representing Fractional
Undivided Interests aggregating not less than 10% of the Invested Amount of the
related Outstanding Series (the "Applicants") apply in writing to the Trustee,
and such application states that the Applicants desire to communicate with other
Investor Certificateholders of any Series with respect to their rights under
this Agreement or under the Investor Certificates and is accompanied by a copy
of the communication which such Applicants propose to transmit,
<PAGE>
Amended and Restated Pooling Agreement 86
then the Trustee, after having been adequately indemnified by such Applicants
for its costs and expenses, shall transmit or shall cause the Transfer Agent and
Registrar to transmit, such communication to the Investor Certificateholders
reasonably promptly after the receipt of such application.
Every Investor Certificateholder, by receiving and holding an
Investor Certificate, agrees with the Trustee that neither the Trustee, the
Transfer Agent and Registrar, nor any of their respective agents, officers,
directors or employees shall be held accountable by reason of the disclosure or
mailing of any such information as to the names and addresses of the Investor
Certificateholders hereunder, regardless of the sources from which such
information was derived.
As soon as practicable following each Record Date, the Trustee shall
provide to the Paying Agent or its designee, a list of Investor
Certificateholders in such form as the Paying Agent may reasonably request.
SECTION 5.08. Authenticating Agent. (a) The Trustee may appoint one
or more authenticating agents with respect to the Investor Certificates which
shall be authorized to act on behalf of the Trustee in authenticating the
Investor Certificates in connection with the issuance, delivery, registration of
transfer, exchange or repayment of the Investor Certificates. Whenever reference
is made in this Agreement to the authentication of Investor Certificates by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication on behalf of the Trustee by an authenticating
agent and a certificate of authentication executed on behalf of the Trustee by
an authenticating agent.
(b) Any institution succeeding to the corporate trust business of an
authenticating agent shall continue to be an authenticating agent without the
execution or filing
<PAGE>
Amended and Restated Pooling Agreement 87
of any paper or any further act on the part of the Trustee or such
authenticating agent.
(c) An authenticating agent may at any time resign by giving written
notice of resignation to the Trustee. Upon the receipt by the Trustee of any
such notice of resignation and upon the giving of any such notice of termination
by the Trustee, the Trustee shall immediately give notice of such resignation or
termination to the Company. Any resignation of an authenticating agent shall not
become effective until acceptance of appointment by the successor authenticating
agent as provided in this Section 5.08. The Trustee may at any time terminate
the agency of an authenticating agent by giving notice of termination to such
authenticating agent. Upon receiving such a notice of resignation or upon such a
termination, or in case at any time an authenticating agent shall cease to be
acceptable to the Trustee, the Trustee promptly may appoint a successor
authenticating agent. Any successor authenticating agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers and duties
of its predecessor hereunder, with like effect as if originally named as an
authenticating agent. No successor authenticating agent (other than an Affiliate
of the Trustee) shall be appointed unless reasonably acceptable to the Trustee
and the Company.
(d) The Company hereby agrees to provide the Trustee from time to
time sufficient funds, on a timely basis and in accordance with and subject to
Section 8.05, for the payment of any reasonable compensation payable to each
authenticating agent for its services under this Section 5.08. The Trustee
hereby agrees that, upon the receipt of such funds from the Company it shall pay
each authenticating agent such amounts.
(e) The provisions of Sections 8.01, 8.02, 8.03 and 8.05 shall be
applicable to any authenticating agent.
<PAGE>
Amended and Restated Pooling Agreement 88
(f) Pursuant to an appointment made under this Section 5.08, the
Investor Certificates may have endorsed thereon, in lieu of the Trustee's
certificate of authentication, an alternate certificate of authentication in
substantially the following form:
"This is one of the Investor Certificates described in the Amended
and Restated Pooling Agreement dated as of February 4, 1997, among LFI
Receivables Corporation, LFI Servicing Corporation, as Master Servicer and
The Chase Manhattan Bank, as Trustee.
THE CHASE MANHATTAN BANK
as Authenticating Agent
for the Trustee
By____________________________
Authorized Signatory
SECTION 5.09. Tax Treatment. It is the intent of the Master
Servicer, the Servicers, the Company, the Investor Certificateholders and the
Trustee that, under applicable U.S. Federal, state and local income and
franchise tax laws, the Investor Certificates will qualify as indebtedness of
the Company secured by the Trust Assets and the Trust will not be characterized
as an association or publicly traded partnership taxable as a corporation. The
Company and the Trustee, by entering into this Agreement, and each Investor
Certificateholder, by its acceptance of its Investor Certificate, agree to treat
the Investor Certificates for applicable U.S. Federal, state and local income
and franchise tax purposes as indebtedness of the Company. The provisions of
this Agreement and all related Transaction Documents shall be construed to
further these intentions of the parties. This Section 5.09 shall survive
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Amended and Restated Pooling Agreement 89
the termination of this Agreement and shall be binding on all transferees of any
of the foregoing persons.
SECTION 5.10. Exchangeable Company Interest. (a) The Company may
decrease the amount of the Exchangeable Company Interest in exchange for (i) an
increase in the Invested Amount of a Class of Investor Certificates of an
Outstanding Series and an increase in any related Subordinated Company Interest
in connection with an issuance of additional Investor Certificates of such
Outstanding Series or (ii) one or more newly issued Series of Investor
Certificates and any related newly issued Subordinated Company Interest (any
such decrease a "Company Exchange"). (A Company Exchange shall not be necessary
in connection with an increase in the Invested Amount of any Investor
Certificates issued in a Series with an Invested Amount that may increase or
decrease from time to time. Such Investor Certificates are expected to be
designated as "Variable Funding Certificates" or "VFC Certificates".) The
Company may perform a Company Exchange by notifying the Trustee, in writing at
least three days in advance (an "Exchange Notice") of the date upon which the
Company Exchange is to occur (an "Exchange Date"). Any Exchange Notice shall
state the designation of any Series to be issued on the Exchange Date and, with
respect to each such Series: (a) its additional or Initial Invested Amount, as
the case may be, if any, which in the aggregate at any time may not be greater
than the current principal amount of the Exchangeable Company Interest, if any,
at such time and (b) its Certificate Rate (or the method for allocating interest
payments or other cash flow to such Series), if any. On the Exchange Date, the
Trustee shall only (i) authenticate and deliver any Investor Certificates
evidencing an increase in the Invested Amount of a Class of Investor
Certificates or a newly issued Series and (ii) permit the issuance of any
related Subordinated Company Interest, upon delivery by the Company to the
Trustee of the following (together with the delivery by the Company to the
Trustee of any additional agreements, instruments or other documents as are
specified in the related Supplement):
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Amended and Restated Pooling Agreement 90
(a) a Supplement executed by the Company and specifying the Principal Terms of
such Series (provided that no such Supplement shall be required for any increase
in the Invested Amount of a Class of Investor Certificates, and any related
increase in the related Subordinated Company Interest, unless it is so required
by the related Supplement), (b) a Tax Opinion addressed to the Trustee and the
Trust, (c) a General Opinion addressed to the Trustee and the Trust, (d) an
Officer's Certificate certifying that all conditions precedent to the
authentication and delivery of such Investor Certificates have been satisfied
and upon which Officer's Certificate the Trustee may conclusively rely, (e)
written confirmation from each Rating Agency that the Company Exchange will not
result in the Rating Agency's reducing or withdrawing its rating on any then
Outstanding Series or any Class of any such Outstanding Series rated by it, (f)
written instructions of an officer of the Company specifying the amount, Series,
Investor Certificates and other Interests to be issued with respect to such
Company Exchange and (g) the applicable Investor Certificates if necessary. Upon
delivery of the items listed in clauses (a) through (g) above, the Trustee shall
cancel the applicable tendered Investor Certificates and Subordinated Company
Interest, as the case may be, and issue, as provided above, such Series of
Investor Certificates and allow the issuance of such Subordinated Company
Interest, if applicable, dated the Exchange Date. The Trustee shall cause to be
kept at the office or agency to be maintained by the Transfer Agent and
Registrar in accordance with the provisions of Section 8.16 a register (the
"Exchange Register") in which, subject to such reasonable regulations as the
Trustee may prescribe, the Transfer Agent and Registrar shall record all Company
Exchanges and the amount of the Exchangeable Company Interest following any such
Company Exchange. There is no limit to the number of Company Exchanges that the
Company may perform under this Agreement. If the Company shall, on any Exchange
Date, retain any Investor Certificates issued on such Exchange Date, it shall,
prior to transferring any such Investor Certificates to another Person, obtain a
Tax
<PAGE>
Amended and Restated Pooling Agreement 91
Opinion. Additional restrictions relating to a Company Exchange may be set forth
in any Supplement.
(b) Upon any Company Exchange, the Trustee, in accordance with the
written directions of the Company, shall issue to the Company under Section
5.01, for execution and redelivery to the Trustee for authentication under
Section 5.02, (i) one or more Investor Certificates representing an increase in
the Invested Amount of an Outstanding Series, or (ii) one or more new Series of
Investor Certificates. Any such Investor Certificates shall be substantially in
the form specified in the applicable Supplement and each shall bear, upon its
face, the designation for such Series to which each such certificate belongs so
selected by the Company.
(c) In conjunction with a Company Exchange, the parties hereto
shall, except as otherwise provided in subsection (a) above, execute a
supplement to this Agreement, which shall define, with respect to any additional
Investor Certificates or newly issued Series, as the case may be: (i) its name
or designation, (ii) its additional or initial principal amount, as the case may
be, (or method for calculating such amount), (iii) its coupon rate (or formula
for the determination thereof), (iv) the interest payment date or dates and the
date or dates from which interest shall accrue, (v) the method for allocating
Collections to Holders, (vi) the names of any accounts to be used by such Series
and the terms governing the operation of any such accounts, (vii) the issue and
terms of a letter of credit or other form of Enhancement, if any, with respect
thereto, (viii) the terms on which the certificates of such Series may be
repurchased by the Company or may be remarketed to other investors, (viii) the
Series Termination Date, (ix) any deposit account maintained for the benefit of
Holders, (x) the number of classes of such Series, and if more than one class,
the rights and priorities of each such class, (xi) the rights of the holder of
the Exchangeable Company Interest that have been transferred to the holders of
such Series, (xii) the designation of any Series Accounts
<PAGE>
Amended and Restated Pooling Agreement 92
and the terms governing the operation of any such Series Accounts, (xiii)
provisions acceptable to the Trustee concerning the payment of the Trustee's
fees and expenses and (xiv) other relevant terms (all such terms, the "Principal
Terms" of such Series). The Supplement executed in connection with the Company
Exchange shall contain administrative provisions which are reasonably acceptable
to the Trustee.
(d) The Company shall not transfer, assign, exchange or otherwise
dispose of the Exchangeable Company Interest or any Subordinated Company
Interest without (i) the prior satisfaction of the Rating Agency Condition and
(ii) delivery of a Tax Opinion. If the Company shall transfer, assign, exchange
or otherwise dispose of all or any portion of the Exchangeable Company Interest
or any Subordinated Company Interest, in accordance with the preceding sentence,
the Transfer Agent and Registrar shall record the transfer, assignment, exchange
or other disposition of (i) the Exchangeable Company Interest in the Exchange
Register and (ii) any Subordinated Company Interest in a register maintained by
the Transfer Agent and Registrar at its office or agency (the "Subordinated
Interest Register"). Any Holder who wishes to transfer, assign, exchange or
otherwise dispose of all or any portion of the Exchangeable Company Interest or
any Subordinated Company Interest held by it shall deliver instructions and a
written instrument of transfer, with sufficient instructions, duly executed by
the Holder or his attorney-in-fact duly authorized in writing delivered to the
Trustee (unless the Transfer Agent and Registrar is different from the Trustee,
in which case to the Transfer Agent and Registrar) and complying with any
requirements set forth in the applicable Supplement. No service charge shall be
made for any registration of transfer or exchange of all or any portion of the
Exchangeable Company Interest or any Subordinated Company Interest, but the
Transfer Agent and Registrar may require any Holder that is transferring or
exchanging all or any portion of the Exchangeable Company Interest or any
Subordinated Company Interest to pay a sum sufficient to
<PAGE>
Amended and Restated Pooling Agreement 93
cover any tax or governmental charge that may be imposed in connection with any
transfer or exchange of all or any portion of the Exchangeable Company Interest
or the Subordinated Company Interest.
(e) Except as specified in any Supplement for a related Series, all
Investor Certificates of any Series shall be equally and ratably entitled as
provided herein to the benefits hereof without preference, priority or
distinction on account of the actual time or times of authentication and
delivery, all in accordance with the terms and provisions of this Agreement and
the applicable Supplement.
SECTION 5.11. Book-Entry Certificates. If specified in any related
Supplement, the Investor Certificates, or any portion thereof, upon original
issuance, shall be issued in the form of one or more typewritten Investor
Certificates representing the Book-Entry Certificates, to be delivered to the
depository specified in such Supplement (the "Depository") which shall be the
Clearing Agency, specified by, or on behalf of, the Company for such Series. The
Investor Certificates shall initially be registered on the Certificate Register
in the name of the nominee of such Clearing Agency, and no Certificate
Book-Entry Holder will receive a definitive certificate representing such
Certificate Book-Entry Holder's interest in the Investor Certificates, except as
provided in Section 5.13. Unless and until definitive, fully registered Investor
Certificates ("Definitive Certificates") have been issued to Investor
Certificateholders pursuant to Section 5.13 or the related Supplement:
(a) the provisions of this Section 5.11 shall be in full force and
effect;
(b) the Company, the Master Servicer, the Servicers and the Trustee
may deal with each Clearing Agency for all purposes (including the making
of
<PAGE>
Amended and Restated Pooling Agreement 94
distributions on the Investor Certificates) as the Investor
Certificateholder without respect to whether there has been any actual
authorization of such actions by the Certificate Book-Entry Holders with
respect to such actions;
(c) to the extent that the provisions of this Section 5.11 conflict
with any other provisions of this Agreement, the provisions of this
Section 5.11 shall control; and
(d) the rights of Certificate Book-Entry Holders shall be exercised
only through the Clearing Agency and the related Clearing Agency
Participants and shall be limited to those established by law and
agreements between such related Certificate Book-Entry Holders and the
Clearing Agency and/or the Clearing Agency Participants. Pursuant to the
Depository Agreement, the initial Clearing Agency will make book-entry
transfers among the Clearing Agency Participants and receive and transmit
distributions of principal and interest on the Investor Certificates to
such Clearing Agency Participants.
Notwithstanding the foregoing, no Class or Series of Investor
Certificates may be issued as Book-Entry Certificates (but, instead, shall be
issued as Definitive Certificates) unless at the time of issuance of such Class
or Series, the Company and the Trustee receive an opinion of independent counsel
that the Investor Certificates of such Class or Series will be treated as
indebtedness for Federal income tax purposes.
SECTION 5.12. Notices to Clearing Agency. Whenever notice or other
communication to the Investor Certificateholders is required under this
Agreement, unless and until Definitive Certificates shall have been issued to
Certificate Book-Entry Holders pursuant to Section 5.13, the Trustee shall give
all such notices and communications
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Amended and Restated Pooling Agreement 95
specified herein to be given to the Investor Certificateholders to the Clearing
Agencies.
SECTION 5.13. Definitive Certificates. If (a) (i) the Company
advises the Trustee in writing that any Clearing Agency is no longer willing or
able to properly discharge its responsibilities under the applicable Depository
Agreement, and (ii) the Company is unable to locate a qualified successor, (b)
the Company, at its option, advises the Trustee in writing that it elects to
terminate the book-entry system through the Clearing Agency or (c) after the
occurrence of a Servicer Default, Certificate Book-Entry Holders representing
Fractional Undivided Interests aggregating more than 50% of the Invested Amount
held by such Certificate Book-Entry Holders of each affected Series then issued
and outstanding advise the Clearing Agency through the Clearing Agency
Participants in writing, and the Clearing Agency shall so notify the Trustee,
that the continuation of a book-entry system through the Clearing Agency is no
longer in the best interests of the Certificate Book-Entry Holders, the Trustee
shall notify the Clearing Agency, which shall be responsible to notify the
Certificate Book-Entry Holders, of the occurrence of any such event and of the
availability of Definitive Certificates to Certificate Book-Entry Holders
requesting the same. Upon surrender to the Trustee of the Book-Entry
Certificates by the Clearing Agency, accompanied by registration instructions
from the Clearing Agency for registration, the Trustee shall issue the
Definitive Certificates. Neither the Company nor the Trustee shall be liable for
any delay in delivery of such instructions and may conclusively rely on, and
shall be protected in relying on, such instructions.
<PAGE>
Amended and Restated Pooling Agreement 96
ARTICLE VI
Other Matters Relating to the Company
SECTION 6.01. Liability of the Company. The Company shall be liable
for all obligations, covenants, representations and warranties of the Company
arising under or related to this Agreement or any Supplement. Except as provided
in the preceding sentence and otherwise herein, the Company shall be liable only
to the extent of the obligations specifically undertaken by it in its capacity
as Company hereunder.
SECTION 6.02. Limitation on Liability of the Company. Subject to
Sections 6.01 and 10.19, neither the Company nor any of its directors or
officers or employees or agents shall be under any liability to the Trust, the
Trustee, the Holders or any other Person for any action taken or for refraining
from the taking of any action pursuant to this Agreement whether or not such
action or inaction arises from express or implied duties under any Transaction
Document; provided, however, that this provision shall not protect the Company
against any liability which would otherwise be imposed by reason of wilful
misconduct, bad faith or negligence in the performance of any duties or by
reason of reckless disregard of any obligations and duties hereunder. The
Company and any director or officer or employee or agent of the Company may rely
in good faith on any document of any kind prima facie properly executed and
submitted by any Person (other than, in the case of the Company, the Company or
any Servicer) respecting any matters arising hereunder.
ARTICLE VII
Early Amortization Events
SECTION 7.01. Early Amortization Events. Unless modified with
respect to any Series of Investor Certificates
<PAGE>
Amended and Restated Pooling Agreement 97
by any related Supplement, if any one of the following events (each, an "Early
Amortization Event") shall occur:
(a) (i) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Company 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 Company 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 Company, or over all or a substantial part of the property of the
Company shall have been entered, an interim receiver, trustee or other
custodian of the Company for all or a substantial part of the property of
the Company is involuntarily appointed, a warrant of attachment, execution
or similar process is issued against any substantial part of the property
of the Company, and (B) any event referred to in clause (ii)(A) above
continues for 60 days unless dismissed, bonded or discharged; (iii) the
Company 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, 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 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 Company of any general assignment for the benefit of creditors;
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Amended and Restated Pooling Agreement 98
(v) the inability or failure of the Company generally to pay its debts as
such debts become due; or (vi) the Board of Directors of the Company
adopts any resolution or otherwise authorizes action to approve any of the
foregoing;
(b) the Trust or the Company shall become an "investment company"
within the meaning of the 1940 Act;
(c) the Trust shall receive a written notice from the Internal
Revenue Service taking the position that the Trust should be characterized
for United States federal income tax purposes as a "publicly traded
partnership" or as an association taxable as a corporation and counsel to
the Company cannot provide an opinion that such claim is without merit; or
(d) the Trustee shall be appointed Successor Master Servicer or
Successor Servicer pursuant to the Servicing Agreement;
then, an "Early Amortization Period" with respect to all Outstanding Series
shall commence without any notice or other action on the part of the Trustee or
any Investor Certificateholder immediately upon the occurrence of such event.
The Master Servicer shall notify each Rating Agency and the Trustee in writing
of the occurrence of any Early Amortization Period. Upon the commencement
against the Company of a case, proceeding or other action described in clause
(a)(ii) above, the Company shall cease to purchase Receivables from any Seller
and cease to transfer Receivables to the Trust, until such time, if any, as such
case, proceeding or other action is vacated, discharged, or stayed or bonded
pending appeal. If an Insolvency Event with respect to the Company occurs, the
Company shall immediately cease to transfer Receivables to the Trust (or, if the
Company has previously suspended the transfer of Receivables to the Trust to
comply with the preceding sentence, such suspension shall become a permanent
cessation
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Amended and Restated Pooling Agreement 99
of the transfer of Receivables to the Trust) and shall promptly give written
notice to the Trustee of such occurrence. Notwithstanding any cessation of the
transfer to the Trust of additional Receivables, Receivables transferred to the
Trust prior to the occurrence of such Insolvency Event and Collections in
respect of such Receivables and interest, whenever created, accrued in respect
of such Receivables, shall continue to be a part of the Trust.
Additional Early Amortization Events and the consequences thereof
may be set forth in each Supplement with respect to the Series relating thereto.
SECTION 7.02. Additional Rights upon the Occurrence of Certain
Events. (a) After the appointment of the Trustee as Successor Master Servicer or
Successor Servicer pursuant to the Servicing Agreement, the Trustee shall
proceed to sell, dispose of, or otherwise liquidate the Receivables in a
commercially reasonable manner and on commercially reasonable terms, which shall
include the solicitation of competitive bids and the Trustee shall proceed to
consummate the sale, liquidation or disposition of the Receivables as provided
above with the highest bidder for the Receivables. The Company or any of its
Affiliates shall be permitted to bid for the Receivables. In addition, the
Company or any of its Affiliates shall have the right to match any bid by a
third person and be granted the right to purchase the Receivables at such
matched bid price. The provisions of Sections 7.01 and 7.02 shall be cumulative.
All reasonable costs and expenses incurred by the Trustee in such sale shall be
reimbursable to the Trustee as provided in Section 8.05.
(b) The proceeds from the sale, disposition or liquidation of the
Receivables pursuant to subsection (a) above shall be treated as Collections on
the Receivables and such proceeds shall be released to the Trustee in an amount
equal to the amount of any expenses incurred by the Trustee acting in its
capacity either as Trustee or as liquidating
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Amended and Restated Pooling Agreement 100
agent under this Section 7.02 that have not otherwise been reimbursed and the
remainder, if any, will be distributed to holders of each Series after
immediately being deposited in the Collection Account, in accordance with the
provisions of Section 3.01(e) and the related Supplement for such Series. After
giving effect to all such distributions, the remainder, if any, shall be
allocated to the Exchangeable Company Interest and shall be released to the
holders of the Exchangeable Company Interest pro-rata based on the amount of the
Exchangeable Company Interest held by each holder thereof.
ARTICLE VIII
The Trustee
SECTION 8.01. Duties of Trustee. (a) The Trustee, prior to the
occurrence of a Servicer Default or Early Amortization Event of which a
Responsible Officer of the Trustee has actual knowledge and after the curing of
all Servicer Defaults and Early Amortization Events which may have occurred,
undertakes to perform such duties and only such duties as are specifically set
forth in the Pooling and Servicing Agreements or any Supplement and no implied
covenants or obligations shall be read into such Pooling and Servicing
Agreements against the Trustee. If a Servicer Default or Early Amortization
Event of which a Responsible Officer of the Trustee has actual knowledge
occurred (which has not been cured or waived), the Trustee shall exercise the
rights and powers vested in it by any Pooling and Servicing Agreement or any
Supplement and shall use the same degree of care and skill in their exercise as
a prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(b) The Trustee may conclusively rely as to the truth of the
statements and the correctness of the opinions expressed therein upon
resolutions, certificates, statements, opinions, reports, documents, orders or
other
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Amended and Restated Pooling Agreement 101
instruments furnished to the Trustee; provided, that (i) in the case of any of
the above which are specifically required to be furnished to the Trustee
pursuant to any provision of the Pooling and Servicing Agreements, the Trustee
shall, subject to Section 8.02, examine them to determine whether they appear on
their face to conform to the requirements of this Agreement and (ii) in the case
of any of the above as to which the Trustee is required to perform procedures
pursuant to the Internal Operating Procedures Memorandum, the Trustee shall
perform said procedures in accordance with the Internal Operating Procedures
Memorandum.
(c) Subject to subsection 8.01(a), no provision of this Agreement or
any Supplement shall be construed to relieve the Trustee from liability for its
own grossly negligent action, its own grossly negligent failure to act or its
own wilful misconduct; provided, however, that:
(i) the Trustee shall not be liable for an error of judgment unless
it shall be proved that the Trustee was grossly negligent, or acted in bad
faith, in ascertaining the pertinent facts;
(ii) the Trustee shall not be liable with respect to any action
taken, suffered or omitted to be taken by it in good faith;
(iii) the Trustee shall not be charged with knowledge of any failure
by the Master Servicer or any Servicers to comply with any of their
obligations, unless a Responsible Officer of the Trustee obtains actual
knowledge of such failure or the Trustee receives written notice of such
failure from the Master Servicer or any Servicer, any Agent or any
Investor Certificateholder;
(iv) the Trustee shall not be charged with knowledge of a Servicer
Default or Early Amortization Event unless a Responsible Officer of the
Trustee obtains actual knowledge of such event or the Trustee
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Amended and Restated Pooling Agreement 102
receives written notice of such default or event from the Master Servicer
or any Servicer, any Agent or any holder of Investor Certificates;
(v) the Trustee shall not be liable for any investment losses
resulting from any investments of funds on deposit in the Accounts or any
subaccounts thereof (provided that such investments are Eligible
Investments); and
(vi) the Trustee shall have no duty to monitor the performance of
the Master Servicer or any Servicer, nor shall it have any liability in
connection with malfeasance or nonfeasance by the Master Servicer or any
Servicer; the Trustee shall have no liability in connection with
compliance of the Master Servicer or any Servicer or the Company with
statutory or regulatory requirements related to the Receivables; and the
Trustee shall have no duty to perform, except as otherwise required
pursuant to the Internal Operating Procedures Memorandum, any
recalculation or verification of any calculation with respect to data
provided to the Trustee by the Master Servicer or any Servicer.
(d) The Trustee shall not be required to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties under any Pooling and Servicing Agreement or in the exercise of any
of its rights or powers, if there is reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it, and none of the provisions contained in any
Pooling and Servicing Agreement shall in any event require the Trustee to
perform, or be responsible for the manner of performance of, any obligations of
the Master Servicer or any Servicer under such Agreement except during such
time, if any, as the Trustee shall be the successor to, and be vested with the
rights, duties, powers and privileges of,
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Amended and Restated Pooling Agreement 103
the Master Servicer or any Servicer in accordance with the terms of such
Agreement.
(e) The Trustee shall not be required to advance its own funds in
the performance of any of its duties under any Pooling and Servicing Agreement
or the exercise of any of its rights or powers.
(f) Except as expressly provided in any Pooling and Servicing
Agreement, the Trustee shall have no power to vary the corpus of the Trust.
(g) Provided that the Master Servicer or any Servicer and the
Company shall have provided to the Trustee promptly upon request all books,
records and other information reasonably requested by the Trustee and shall have
provided the Trustee with all necessary access to the properties, books and
records of the Master Servicer or any Servicer and the Company which the Trustee
may reasonably require, then within 90 days following the Initial Closing Date,
the Trustee shall have (i) completed the Servicer Site Review and (ii)
established the Standby Liquidation System, and shall have notified the Master
Servicer or any Servicer, each Rating Agency and each Investor Certificateholder
of such events.
(h) The Trustee shall prepare, within 45 days of the Initial Closing
Date, the Internal Operating Procedures Memorandum. Once prepared, the Trustee
shall take such actions as are set forth in the Internal Operating Procedures
Memorandum unless prevented from doing so through
no fault of the Trustee.
SECTION 8.02. Rights of the Trustee. Except as otherwise provided in
Section 8.01 and in the Internal Operating Procedures Memorandum:
(a) The Trustee may conclusively rely on and shall be protected in
acting on, or in refraining from acting in accord with, any resolution,
Officers
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Amended and Restated Pooling Agreement 104
Certificate, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
appraisal, bond, note or other paper or document believed by it to be
genuine and to have been signed or presented to it pursuant to any Pooling
and Servicing Agreement by the proper party or parties.
(b) The Trustee may consult with counsel and any Opinion of Counsel
and any advice of such counsel shall be full and complete authorization
and protection in respect of any action taken or suffered or omitted by it
hereunder in good faith and in accordance with such Opinion of Counsel.
(c) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by any Pooling and Servicing Agreement, or
to institute, conduct or defend any litigation hereunder or in relation
hereto, at the request, order or direction of any of the Holders, pursuant
to the provisions of any Pooling and Servicing Agreement, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred therein
or thereby; provided, however, that nothing contained herein shall relieve
the Trustee of the obligations, upon the occurrence of a Servicer Default
or Early Amortization Event (which has not been cured), to exercise such
of the rights and powers vested in it by any Pooling and Servicing
Agreement, and to use the same degree of care and skill in their exercise
as a prudent person would exercise or use under the circumstances in the
conduct of such person's own affairs. The right of the Trustee to perform
any discretionary act enumerated in this Agreement shall not be construed
as a duty, and the Trustee shall not be answerable for other than its
gross negligence or wilful misconduct in the performance of any such act.
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Amended and Restated Pooling Agreement 105
(d) The Trustee shall not be personally liable for any action taken,
suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon it
by any Pooling and Servicing Agreement; provided that the Trustee shall be
liable for its gross negligence or wilful misconduct.
(e) The Trustee shall not be bound to make any investigation into
the facts of matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, direction, order,
approval, bond, note or other paper or document, unless requested in
writing so to do by the holders of Investor Certificates evidencing
Fractional Undivided Interests aggregating more than 50% of the Invested
Amount of any Series which could be materially and adversely affected if
the Trustee does not perform such acts; provided, however, that such
holders of Investor Certificates shall indemnify and reimburse the Trustee
for any liability or expense resulting from any such investigation
requested by them; provided further that the Trustee shall be entitled to
make such further inquiry or investigation into such facts or matters as
it may reasonably see fit, and if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the
books and records of the Company, personally or by agent or attorney, at
the sole cost and expense of the Company.
(f) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through affiliates,
agents or attorneys or a custodian or nominee, and the Trustee shall not
be responsible for any misconduct or negligence on the part of, or for the
supervision of, any such affiliate, agent, attorney, custodian or nominee
appointed with due care by it hereunder.
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Amended and Restated Pooling Agreement 106
(g) The Trustee shall not be required to make any initial or
periodic examination of any documents or records related to the
Receivables or the Accounts for the purpose of establishing the presence
or absence of defects, the compliance by the Company with its
representations and warranties or for any other purpose.
(h) In the event that the Trustee is also acting as Paying Agent or
Transfer Agent and Registrar hereunder, the rights and protections
afforded to the Trustee pursuant to this Article VIII shall also be
afforded to such Paying Agent or Transfer Agent and
Registrar.
SECTION 8.03. Trustee Not Liable for Recitals. The Trustee assumes
no responsibility for the correctness of the recitals contained herein and in
the Investor Certificates (other than the certificate of authentication on the
Investor Certificates). Except as set forth in Section 8.15, the Trustee makes
no representations as to the validity or sufficiency of any Pooling and
Servicing Agreement, of the Investor Certificates (other than the certificate of
authentication on the Investor Certificates), of the Exchangeable Company
Interest, of any Subordinated Company Interest, of any Receivable or related
document or interest. The Trustee shall not be accountable for the use or
application by the Company of any of the Investor Certificates, any Subordinated
Company Interest or the Exchangeable Company Interest or of the proceeds of such
Investor Certificates, such Subordinated Company Interest or the Exchangeable
Company Interest or for the use or application of any funds paid to the Company
in respect of the Receivables or deposited in or withdrawn from the Accounts or
other accounts hereafter established to effectuate the transactions contemplated
herein and in accordance with the terms of any Pooling and Servicing Agreement.
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Amended and Restated Pooling Agreement 107
The Trustee shall not be accountable for the use or application by
the Master Servicer or any Servicer of any of the Investor Certificates or of
the proceeds of such Investor Certificates, or for the use or application of any
funds paid to the Master Servicer or any Servicer in respect of the Receivables
or deposited in or withdrawn from the Accounts or any Lockbox by or at the
direction of the Servicers or Lockbox Processors. The Trustee shall at no time
have any responsibility or liability for or with respect to the legality,
validity and enforceability of any Receivable.
SECTION 8.04. Trustee May Own Investor Certificates. The Trustee in
its individual or any other capacity (a) may become the owner or pledgee of
Investor Certificates with the same rights as it would have if it were not the
Trustee and (b) may transact any banking and trust business with the Company,
the Master Servicer or any Servicer or the Sellers as it would were it not the
Trustee.
SECTION 8.05. Trustee's Fees and Expenses. The Master Servicer and
each Servicer covenant and agree to pay, but only from funds available to them
as the Servicing Fee paid under the Servicing Agreement, to the Trustee annually
in advance on the Initial Closing Date and on or about each one year anniversary
thereof, and the Trustee shall be entitled to receive, such reasonable
compensation as is agreed upon in writing between the Trustee and the Company
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all services rendered by it
in the execution of the trust hereby created and in the exercise and performance
of any of the powers and duties hereunder of the Trustee. The Trustee shall be
entitled to reimbursement upon its request for all reasonable expenses
(including, without limitation, expenses incurred in connection with notices,
requests for documentation or other communications to Holders), disbursements,
losses, liabilities, damages and advances incurred or made by the Trustee in
accordance with any of the provisions of any Pooling and Servicing Agreement or
by
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Amended and Restated Pooling Agreement 108
reason of its status as Trustee under any Pooling and Servicing Agreement
(including the reasonable fees and expenses of its agents, any co-trustee and
counsel) except any such expense, disbursement, loss, liability, damage or
advance as may arise from its gross negligence or bad faith. To the extent the
fees and expenses of the Trustee are not paid on a current basis, the Trustee
shall be entitled to be paid such items from amounts that would be distributable
to the Company under Article III of this Agreement and, to the extent still
unpaid in full, the Company will pay or reimburse the Trustee upon its request
for such items. Notwithstanding anything contained in this Agreement to the
contrary, the Trustee shall not be entitled to reimbursement for any costs or
expenses incurred in connection with the review, negotiation, preparation,
execution and delivery of any of the Transaction Documents or in connection with
the issuance of any Investor Certificates on the Initial Closing Date except for
such costs and expenses as have been agreed to in writing between the Trustee
and Company. If the Trustee is appointed Successor Master Servicer or a
Successor Servicer in accordance with the Servicing Agreement, the provisions of
this Section 8.05 shall not apply to expenses, disbursements, losses,
liabilities, damages and advances made or incurred by the Trustee in its
capacity as Successor Master Servicer or a Successor Servicer, which items shall
be paid, first, out of the Servicing Fee, second, from amounts which would be
distributable to the Company under Article III of this Agreement, third, from
amounts distributable to the Company pursuant to Section 9.04 and fourth, to the
extent still unpaid in full, the Company will pay or reimburse the Trustee upon
its request for such items. The provisions of this Section 8.05 shall apply to
the reasonable expenses, disbursements and advances made or incurred by the
Trustee, or any other Person, in its capacity as liquidating agent, to the
extent not otherwise paid. The covenants to pay the expenses, disbursements,
losses, liabilities, damages and advances provided for in this Section shall
survive the termination of any Pooling and Servicing Agreement and shall be
binding on the Company, the Master Servicer, the
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Amended and Restated Pooling Agreement 109
Servicers and any Successor Master Servicer or Successor Servicer. The
Company's, the Master Servicer's and the Servicers' covenants and agreements
contained in this Section 8.05 shall survive the termination of this Agreement.
SECTION 8.06. Eligibility Requirements for Trustee. The Trustee
hereunder shall at all times be a corporation organized and doing business under
the laws of the United States of America or any state thereof authorized under
such laws to exercise corporate trust powers, having (or having a holding
company parent with) a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by federal or state authority. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then,
for the purpose of this Section 8.06, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section 8.06, the Trustee shall resign immediately in the manner and with the
effect specified in Section 8.07.
SECTION 8.07. Resignation or Removal of Trustee. (a) Subject to
paragraph (c) below, the Trustee may at any time resign and be discharged from
the trust hereby created by giving written notice thereof to the Company, the
Master Servicer and the Rating Agencies. Upon receiving such notice of
resignation, the Company shall promptly appoint a successor trustee by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
resigning Trustee and one copy to the successor trustee. If no successor trustee
shall have been so appointed and have accepted such appointment within 30 days
after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
trustee.
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Amended and Restated Pooling Agreement 110
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.06 hereof and shall fail to resign
after written request therefor by the Master Servicer, or if at any time the
Trustee shall be legally unable to act, or shall be adjudged a bankrupt or
insolvent, or if a receiver of the Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Company may remove the Trustee and promptly appoint a
successor trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to the
successor trustee.
(c) Any resignation or removal of the Trustee and appointment of
successor trustee pursuant to any of the provisions of this Section 8.07 shall
not become effective until acceptance of appointment by the successor trustee as
provided in Section 8.08.
(d) The obligations of the Company described in Section 8.05 hereof
and the obligations of the Master Servicer described in Section 8.05 hereof and
Section 5.01 of the Servicing Agreement shall survive the removal or resignation
of the Trustee as provided in this Agreement.
(e) No Trustee under this Agreement shall be personally liable for
any action or omission of any successor trustee.
SECTION 8.08. Successor Trustee. (a) Any successor trustee appointed
as provided in Section 8.07 shall execute, acknowledge and deliver to the
Company and to its predecessor Trustee an instrument accepting such appointment
hereunder, and thereupon the resignation or removal of the predecessor Trustee
shall become effective and such successor trustee, without any further act, deed
or conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder,
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Amended and Restated Pooling Agreement 111
with like effect as if originally named as Trustee herein. The predecessor
Trustee shall deliver to the successor trustee all documents or copies thereof,
at the expense of the Master Servicer, and statements held by it hereunder; and
the Company and the predecessor Trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for fully and
certainly vesting and confirming in the successor trustee all such rights,
power, duties and obligations. The Master Servicer shall immediately give
notice, but in no event less than 10 days prior to any such resignation or
removal, to each Rating Agency upon the appointment of a successor trustee.
(b) No successor trustee shall accept appointment as provided in
this Section 8.08 unless at the time of such acceptance such successor trustee
shall be eligible under the provisions of Section 8.06.
(c) Upon acceptance of appointment by a successor trustee as
provided in this Section 8.08, such successor trustee shall mail notice of such
succession hereunder to all Holders at their addresses as shown in the
Certificate Register, the Exchange Register or the Subordinated Interest
Register, as applicable.
SECTION 8.09. Merger or Consolidation of Trustee. Any Person into
which the Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such corporation shall be eligible under the
provisions of Section 8.06, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding. The Trustee shall promptly give notice (except to the
extent prohibited under any Requirement of Law or Contractual Obligation), but
in no event less than 10 days prior to any such merger or consolidation, to the
Company, the Master
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Amended and Restated Pooling Agreement 112
Servicer and the Rating Agencies upon any such merger or consolidation of the
Trustee. Information as to such merger or consolidation that is made publicly
available by the Trustee in at least two Authorized Newspapers shall be deemed
to satisfy the notice requirement of this Section 8.09.
SECTION 8.10. Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions of any Pooling and Servicing Agreement, at
any time, for the purpose of meeting any legal requirements of any jurisdiction
in which any part of the Trust may at the time be located, the Trustee shall
have the power and may execute and deliver all instruments to appoint one or
more persons to act as a co-trustee or co-trustees, or separate trustee or
separate trustees, of all or any part of the Trust, and to vest in such Person
or Persons, in such capacity and for the benefit of the Holders, such title to
the Trust, or any part thereof, and, subject to the other provisions of this
Section 8.10, such powers, duties, obligations, rights and trusts as the Trustee
may consider necessary. No co-trustee or separate trustee hereunder shall be
required to meet the terms of eligibility as a successor trustee under Section
8.06 and no notice to Holders of the appointment of any co-trustee or separate
trustee shall be required under Section 8.08. The Trustee shall promptly notify
each Rating Agency of the appointment of any co-trustee.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred or imposed upon and exercised or
performed by the Trustee and such separate trustee or co-trustee jointly
(it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in such act),
except to the extent that under any statute of any jurisdiction in
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Amended and Restated Pooling Agreement 113
which any particular act or acts are to be performed (whether as Trustee
hereunder or as successor to the Master Servicer hereunder), the Trustee
shall be incompetent or unqualified to perform such act or acts, in which
event such rights, powers, duties and obligations (including the holding
of title to the Trust or any portion thereof in any such jurisdiction)
shall be exercised and performed singly by such separate trustee or
co-trustee, but solely at the direction of the Trustee;
(ii) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder; and
(iii) the Trustee may at any time accept the resignation of or
remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee shall
be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VIII. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of any Pooling and Servicing Agreement, specifically including every provision
of any Pooling and Servicing Agreement relating to the conduct of, affecting the
liability of, or affording protection to, the Trustee. Every such instrument
shall be filed with the Trustee and a copy thereof given to the Master Servicer
and the Company.
(d) Any separate trustee or co-trustee may at any time constitute
the Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited
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Amended and Restated Pooling Agreement 114
by law, to do any lawful act under or in respect to any Pooling and Servicing
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
SECTION 8.11. Tax Returns. In the event the Trust shall be required
to file U.S. Federal, state, local or foreign income tax returns, the Company
shall prepare and file or shall cause to be prepared and filed any such tax
returns required to be filed by the Trust and shall remit such tax returns to
the Trustee for signature at least five Business Days before such tax returns
are due to be filed (including extensions). The Company shall also prepare or
shall cause to be prepared all U.S. Federal tax information in connection with
this Agreement required by law to be distributed to Holders and shall deliver
such information to the Trustee at least five Business Days prior to the date it
is required by law to be distributed to the Holders. The Trustee, upon request,
will furnish the Company with all such information known to the Trustee as may
be reasonably determined by the Company to be required in connection with the
preparation of all U.S. Federal, state, local or foreign income tax returns of
the Trust, and shall, upon the Company's written request, execute such tax
returns. In no event shall the Trustee in its individual capacity be liable for
any liabilities, costs or expenses of the Trust, the Holders, the Company the
Master Servicer, or the Servicers arising under any U.S. Federal, state, local
or foreign income tax law or regulation, including, without limitation, excise
taxes or any other tax imposed by a Governmental Authority on or measured by
income (or any interest or penalty with respect thereto or arising from any
failure to comply therewith). The Trustee shall not be required to determine
whether any filing of tax returns is required.
<PAGE>
Amended and Restated Pooling Agreement 115
SECTION 8.12. Trustee May Enforce Claims Without Possession of
Investor Certificates. All rights of action and claims under any Pooling and
Servicing Agreement or the Investor Certificates may be prosecuted and enforced
by the Trustee without the possession of any of the Investor Certificates or the
production thereof in any proceeding relating thereto, and any such proceeding
instituted by the Trustee shall be brought in its own name as trustee. Any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the Investor Certificateholders in
respect of which such judgment has been obtained.
SECTION 8.13. Suits for Enforcement. If a Servicer Default shall
occur and be continuing, the Trustee may, as provided in Section 6.01 of the
Servicing Agreement, proceed to protect and enforce its rights and the rights of
the Holders under this Agreement or any other Transaction Document by suit,
action or proceeding (including any suit, action or proceeding on behalf of the
Holders against any third party) in equity or at law or otherwise, whether for
the specific performance of any covenant or agreement contained in this
Agreement or any other Transaction Document or in aid of the execution of any
power granted in this Agreement or any other Transaction Document or for the
enforcement of any other legal, equitable or other remedy as the Trustee, being
advised by counsel, shall deem most effectual to protect and enforce any of the
rights of the Trustee or the Holders. In furtherance of and without limiting the
generality of subsection 8.01(d), the Trustee shall have the right to obtain,
before initiating any such action, such reasonable indemnity from the Investor
Certificateholders as the Trustee may require against the costs, expenses and
liabilities that may be incurred therein or thereby. Nothing herein contained
shall be deemed to authorize the Trustee to authorize or consent to or accept or
adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Investor Certificates, the Subordinated
Company Interests or
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Amended and Restated Pooling Agreement 116
the Exchangeable Company Interest or the rights of any holder thereof, or
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 8.14. Rights of Investor Certificateholders To Direct
Trustee. Investor Certificateholders evidencing more than 50% of the Invested
Amount of any Series affected by the conduct of any proceeding or the exercise
of any right conferred on the Trustee shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee; provided,
however, that nothing in any Pooling and Servicing Agreement shall impair the
right of the Trustee to take any action deemed proper by the Trustee and which
is not inconsistent with such direction of the Investor Certificateholders;
provided further in furtherance and without limiting the generality of
subsection 8.01(d), the Trustee shall have the right to obtain, before acting in
accordance with any such direction of the Investor Certificateholders, such
reasonable indemnity from the Investor Certificateholders as the Trustee may
require against the costs, expenses and liabilities that may be incurred in so
acting.
SECTION 8.15. Representations and Warranties of Trustee. The Trustee
represents and warrants that:
(a) the Trustee is a banking corporation organized, existing and in
good standing under the laws of the State of New York and is duly
authorized to exercise trust powers under applicable law;
(b) the Trustee has the power and authority to enter into this
Agreement and any Supplement, and has taken all necessary action to
authorize the execution, delivery and performance by it of this Agreement
and any Supplement; and
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Amended and Restated Pooling Agreement 117
(c) each Pooling and Servicing Agreement and each of the Transaction
Documents executed by it have been duly executed and delivered by the
Trustee and, in the case of all such Transaction Documents, are legal,
valid and binding obligations of the Trustee, enforceable in accordance
with their respective terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect affecting the enforcement of
creditors' rights generally and except as such enforceability may be
limited by general principles of equity (whether considered in a suit at
law or in equity).
SECTION 8.16. Maintenance of Office or Agency. The Trustee will
maintain at its expense in the Borough of Manhattan, The City of New York, an
office or offices or agency or agencies where notices and demands to or upon the
Trustee in respect of the Investor Certificates or any other Interests and the
Pooling and Servicing Agreements may be served. The Trustee will give prompt
written notice to the Company, the Master Servicer and the Holders of any change
in the location of the Certificate Register, the Exchange Register, the
Subordinated Interest Register or any such office or agency.
SECTION 8.17. Limitation of Liability. The Investor Certificates are
executed by the Trustee, not in its individual capacity but solely as Trustee of
the Trust, in the exercise of the powers and authority conferred and vested in
it by the Trust Agreement. Each of the undertaking and agreements made on the
part of the Trustee in the Investor Certificates is made and intended not as a
personal undertaking or agreement by the Trustee but is made and intended for
the purpose of binding only the Trust.
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Amended and Restated Pooling Agreement 118
ARTICLE IX
Termination
SECTION 9.01. Termination of Trust. (a) The Trust and the respective
obligations and responsibilities of the Company, the Servicers and the Trustee
created hereby (other than the obligation of the Trustee to make payments to
Holders as hereafter set forth) shall terminate, except with respect to any such
obligations or responsibilities expressly stated to survive such termination, on
the earliest of (i) the last day of the July 2011 Settlement Period, (ii) at the
option of the Company, at any time when the Aggregate Invested Amount is zero,
(iii) following the occurrence of any of the Early Amortization Events specified
in Section 7.01 of this Agreement, at any time when the Aggregate Invested
Amount is zero and (iv) upon completion of distribution of the amounts referred
to in subsection 7.02(b) (the "Trust Termination Date").
(b) If on the Distribution Date in the month immediately preceding
the month in which the Trust Termination Date occurs (after giving effect to all
transfers, withdrawals, deposits and drawings to occur on such date and the
payment of principal on any Series of Investor Certificates to be made on the
related Distribution Date pursuant to Article III) the Invested Amount of any
Series would be greater than zero (as certified in writing by the Master
Servicer), the Trustee, at the written direction of the Master Servicer, shall
make reasonable efforts to sell within 30 days of such Distribution Date all of
the Receivables. The proceeds of such sale shall be treated as Collections on
the Receivables and shall be allocated in accordance with Article III. During
such 30-day period, the Servicers shall continue to collect Collections on the
Receivables and allocate Collections in accordance with the provisions of
Article III. The reasonable costs and expenses incurred by the Trustee in such
sale shall be reimbursable to the Trustee as provided in Section 8.05.
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Amended and Restated Pooling Agreement 119
SECTION 9.02. Optional Purchase and Final Termination Date of
Investor Certificates of Any Series. (a) On any Distribution Date during the
Amortization Period with respect to any Series on which the Invested Amount (or
such other amount as may be set forth in the related Supplement) of such Series
is reduced to an amount equal to or less than the Optional Repurchase Percentage
of the Initial Invested Amount (or such other amount as may be set forth in the
related Supplement) for such Series as of the day preceding the beginning of
such Amortization Period, the Company shall have the option to repurchase the
entire Investor Certificateholders' Interest of such Series, at a purchase price
equal to (i) the outstanding Invested Amount of the Investor Certificates of
such Series plus (ii) accrued and unpaid interest through such Distribution Date
(after giving effect to any payment of principal and monthly interest on such
date of purchase) plus (iii) all other amounts payable to all Investor
Certificateholders of such Series under the related Supplement (such purchase
price, the "Clean-Up Call Repurchase Price"). The amount of the Clean-Up Call
Repurchase Price will be deposited into the Collection Account for credit to the
Series Collection Subaccount for such Series on such Distribution Date in
immediately available funds and will be passed through in full to the applicable
Investor Certificateholders. Following any such repurchase, such Investor
Certificateholders' Interest in the Receivables shall terminate and such
interest therein will be allocated to the Exchangeable Company Interest and such
Investor Certificateholders will have no further rights with respect thereto. In
the event that the Company fails for any reason to deposit the Clean-Up Call
Repurchase Price for such Receivables, the Investor Certificateholders' Interest
in the Receivables will continue and monthly payments will continue to be made
to the Investor Certificateholders.
(b) The amount deposited pursuant to subsection 9.02(a) shall be
paid to the Investor Certificateholders of the related Series pursuant to
Article III on the Distribution Date following the date of
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Amended and Restated Pooling Agreement 120
such deposit. All Investor Certificates of a Series which are purchased by the
Company pursuant to subsection 9.02(a) shall be delivered by the Company upon
such purchase to, and be canceled by (in accordance with the written directions
of the Company), the Transfer Agent and Registrar and be disposed of in a manner
satisfactory to the Trustee and the Company.
(c) All principal or interest with respect to any Series of Investor
Certificates shall be due and payable no later than the Series Termination Date
with respect to such Series. Unless otherwise provided in a Supplement, in the
event that the Invested Amount of any Series of Investor Certificates is greater
than zero on its Series Termination Date (after giving effect to all transfers,
withdrawals, deposits and drawings to occur on such date and the payment of
principal to be made on such Series on such date), the Trustee will sell or
cause to be sold, in accordance with the directions of 50% of the Investor
Certificateholders of such Series (upon which the Trustee may conclusively rely)
and pay the proceeds to all Investor Certificateholders of such Series pro rata
(except that unless expressly provided to the contrary in the related
Supplement, no payment shall be made to Investor Certificateholders of any Class
of any Series that is by its terms subordinated to any other Class until such
senior Class of Investor Certificates have been paid in full) in final payment
of all principal of and accrued interest on such Series of Investor
Certificates, an amount of Receivables or interests in Receivables up to the
Invested Amount of such Series at the close of business on such date; provided,
however, in furtherance and without limiting the generality of subsection
8.01(d), the Trustee shall have the right to obtain, before acting in accordance
with any such direction of the Investor Certificateholders, such reasonable
indemnity from the Investor Certificateholders as the Trustee may require
against the costs, expenses and liabilities that may be incurred in so acting.
Absent such direction from Investor Certificateholders representing more than
50% of the Invested Amount of such Series or absent such reasonable
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Amended and Restated Pooling Agreement 121
indemnity as the Trustee may require in connection with such direction, the
Trustee shall continue to hold the Trust Assets in respect of such Series in
accordance with the terms of the Pooling and Servicing Agreements until the
Trust Termination Date (or until a majority of the Investor Certificateholders
shall otherwise direct the Trustee); provided that the terms of this Agreement,
the related Supplement and the Servicing Agreement shall be deemed to remain in
full force and effect, except that no additional Receivables shall be allocated
with respect to such Series. The reasonable costs and expenses incurred by the
Trustee in such sale shall be reimbursable to the Trustee as provided in Section
8.05. Any proceeds of such sale in excess of such principal and interest paid
shall be paid to the holder of the Exchangeable Company Interest, unless and to
the extent otherwise specified in any applicable Supplement. Upon such Series
Termination Date with respect to the applicable Series, final payment of all
amounts allocable to any Investor Certificates of such Series shall be made in
the manner provided in this Section 9.02.
SECTION 9.03. Final Payment with Respect to Any Series. (a) Written
notice of any termination, specifying the Distribution Date upon which the
Investor Certificateholders of any Series may surrender their Investor
Certificates for payment of the final distribution with respect to such series
and cancelation, shall be given (subject to at least 30 days prior written
notice from the Master Servicer to the Trustee containing all information
required for the Trustee's notice or such shorter period as is acceptable to the
Trustee) by the Trustee to Investor Certificateholders of such Series mailed not
later than the fifth day of the month of such final distribution specifying (i)
the Distribution Date upon which final payment of the Investor Certificates will
be made upon presentation and surrender of Investor Certificates at the office
or offices therein designated, (ii) the amount of any such final payment and
(iii) that the Record Date otherwise applicable to such Distribution Date is not
applicable, payments being made only upon presentation and surrender of the
Investor
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Amended and Restated Pooling Agreement 122
Certificates at the office or offices therein specified. The Master Servicer's
notice to the Trustee in accordance with the preceding sentence shall be
accompanied by an Officer's Certificate setting forth the information specified
in Section 4.04 of the Servicing Agreement covering the period during the then
current calendar year through the date of such notice. The Trustee shall give
such notice to the Transfer Agent and Registrar and the Paying Agent at the time
such notice is given to such Investor Certificateholders.
(b) Notwithstanding the termination of the Trust pursuant to
subsection 9.01(a) or the occurrence of the Series Termination Date with respect
to any Series pursuant to Section 9.02, all funds then on deposit in the
Collection Account (but only to the extent necessary to pay all outstanding and
unpaid amounts to Holders) shall continue to be held in trust for the benefit of
the Holders and the Paying Agent or the Trustee shall pay such funds to the
Investor Certificateholders upon surrender of their Investor Certificates in
accordance with the terms hereof. Any Investor Certificate not surrendered on
the date specified in subsection 9.03(a)(i) shall cease to accrue any interest
provided for such Investor Certificate from and after such date. In the event
that all of the Investor Certificateholders shall not surrender their Investor
Certificates for cancelation within six months after the date specified in the
above-mentioned written notice, the Trustee shall give a second written notice
to the remaining Investor Certificateholders of such Series to surrender their
Investor Certificates for cancelation and receive the final distribution with
respect thereto. If within one year after the second notice all the Investor
Certificates of such Series shall not have been surrendered for cancelation, the
Trustee may take appropriate steps, or may appoint an agent to take appropriate
steps, to contact the remaining Investor Certificateholders of such Series
concerning surrender of their Investor Certificates, and the cost thereof shall
be paid out of the funds in the Collection Account held for the benefit of such
Investor
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Amended and Restated Pooling Agreement 123
Certificateholders. The Trustee and the Paying Agent shall pay to the Company
upon request any monies held by them for the payment of principal or interest
that remains unclaimed for two years and neither the Trustee nor the Paying
Agent shall be liable to any Investor Certificateholder for such payment to the
Company upon its request. After payment to the Company, Holders entitled to the
money must look to the Company for payment as general creditors unless an
applicable abandoned property law designates another Person.
(c) All Investor Certificates surrendered for payment of the final
distribution with respect to such Investor Certificates and cancelation shall be
canceled by the Transfer Agent and Registrar and be disposed of in a customary
manner satisfactory to the Trustee.
SECTION 9.04. Company's Termination Rights. Upon the termination of
the Trust pursuant to Section 9.01 and payment to the Trustee (in its capacity
as such and/or in its capacity as Successor Master Servicer) of all amounts owed
to it under any Pooling and Servicing Agreement, the Trustee shall assign and
convey to the Company (without recourse, representation or warranty) in exchange
for the Exchangeable Company Interest all right, title and interest of the Trust
in the Trust Assets, whether then existing or thereafter created, and all
proceeds thereof except for amounts held by the Trustee pursuant to subsection
9.03(b). The Trustee shall execute and deliver such instruments of transfer and
assignment, in each case without recourse, representation or warranty, as shall
be reasonably requested by the Company to vest in the Company all right, title
and interest which the Trust had in the Trust Assets.
ARTICLE X
Miscellaneous Provisions
SECTION 10.01. Amendment. (a) This Agreement, the Servicing
Agreement and each Supplement in respect of an
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Amended and Restated Pooling Agreement 124
Outstanding Series (collectively, the "Pooling and Servicing Agreements") may be
amended in writing from time to time by the Master Servicer, the Company and the
Trustee, without the consent of any Holder, to cure any ambiguity, to correct or
supplement any provisions herein or therein which may be inconsistent with any
other provisions herein or therein or to add any other provisions hereof to
change in any manner or eliminate any of the provisions with respect to matters
or questions raised under any Pooling and Servicing Agreement which shall not be
inconsistent with the provisions of any Pooling and Servicing Agreement;
provided, however, that such action shall not, as evidenced by an Officer's
Certificate delivered to the Trustee, have a Material Adverse Effect or a
Company Material Adverse Effect (but, to the extent that the determination of
whether such action would have a Material Adverse Effect or a Company Material
Adverse Effect requires a conclusion as to a question of law, an Opinion of
Counsel shall be delivered to the Trustee in addition to such Officer's
Certificate); provided further any amendment that is entered into to provide
additional Enhancement for any Outstanding Series shall be deemed to have no
Material Adverse Effect or Company Material Adverse Effect. The Trustee may, but
shall not be obligated to, enter into any such amendment pursuant to this
paragraph or paragraph (b) below which affects the Trustee's rights, duties or
immunities under any Pooling and Servicing Agreement or otherwise.
(b) Any Pooling and Servicing Agreement and, to the extent provided
in any Pooling and Servicing Agreement, any other agreement relating to the
Receivables may also be amended (other than in the circumstances referred to in
the preceding paragraph (a)) in writing from time to time by the Master
Servicer, the Company and the Trustee with the consent of Investor
Certificateholders evidencing more than 50% of the Invested Amount of any Series
adversely affected in any material respect by the amendment (or, if any such
Series shall have more than one Class of Investor Certificates adversely
affected in any material respect by the amendment, more than 50% of the Invested
Amount of each
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Amended and Restated Pooling Agreement 125
such Class) for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of such Pooling and Servicing
Agreement or such other agreement or of modifying in any manner the rights of
holders of any Series then issued and outstanding; provided, however, that no
such amendment shall (i) reduce in any manner the amount of, or delay the timing
of, distributions which are required to be made on any Investor Certificate of
such Series without the consent of such Investor Certificateholder of such
Series; (ii) change the definition of or the manner of calculating the interest
of any Investor Certificateholder of such Series without the consent of such
Investor Certificateholder; or (iii) reduce the aforesaid percentage of the
Invested Amount of any adversely affected Series or Class the holders of which
are required to consent to any such amendment without the consent of all
Investor Certificateholders of each Series adversely affected in any material
respect.
(c) Notwithstanding anything in this Section 10.01 to the contrary,
the Supplement with respect to any Series may be amended on the terms and with
the procedures provided in such Supplement.
(d) Promptly after the execution of any such amendment or consent,
the Trustee shall furnish written notification of the substance of such
amendment to each Investor Certificateholder of each Outstanding Series (or with
respect to an amendment of a Supplement, to each Investor Certificateholder of
the applicable Series), and the Master Servicer shall furnish written
notification of the substance of such amendment to each Rating Agency. No such
amendment (including without limitation, the amendment of any Supplement
notwithstanding anything to the contrary contained in any Supplement) shall be
effective until the Rating Agency Condition has been satisfied.
(e) It shall not be necessary for the consent of Investor
Certificateholders under this Section 10.01 to approve the particular form of
any proposed amendment, but
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Amended and Restated Pooling Agreement 126
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Investor Certificateholders shall be subject to such
reasonable requirements as the Trustee may prescribe.
(f) In executing or accepting any amendment pursuant to this Section
10.01, the Trustee shall, upon request, be entitled to receive and rely upon (i)
an Opinion of Counsel stating that such amendment is authorized pursuant to a
specific provision of a Pooling and Servicing Agreement and complies with such
provision, (ii) a certificate from a Responsible Officer of the Company stating
that such (A) amendment shall not adversely affect the interests of the holders
of any outstanding Investor Certificates in any material respect except for
holders of the Series whose consent to such amendment has been obtained in
accordance with clause (b) of this Section 10.01 and (B) all conditions
precedent to the execution and delivery of such amendment shall have been
satisfied in full and (iii) a Tax Opinion.
SECTION 10.02. Protection of Right, Title and Interest to Trust. The
Company shall cause each Pooling and Servicing Agreement, all amendments thereto
and/or all financing statements and continuation statements and any other
necessary documents covering the Holders' and the Trustee's right, title and
interest to the Trust to be promptly recorded, registered and filed, and at all
times to be kept recorded, registered and filed, all in such manner and in such
places as may be required by law fully to preserve and protect the right, title
and interest of the Trustee hereunder to all property comprising the Trust. The
Company shall deliver to the Trustee copies of, or filing receipts for, any
document recorded, registered or filed as provided above, as soon as available
following such recording, registration or filing. In the event that the Company
fails to file such financing or continuation statements and the Trustee has
received an opinion of counsel, at the expense of the Company, that such filing
is
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Amended and Restated Pooling Agreement 127
necessary to fully to preserve and to protect the Trustee's right, title and
interest in any Trust Asset then the Trustee shall have the right to file the
same on behalf of the Company and the Trustee shall be reimbursed and
indemnified by the Company for making such filing.
SECTION 10.03. Limitation on Rights of Holders. (a) The death or
incapacity of any Holder shall not operate to terminate this Agreement or the
Trust, nor shall such death or incapacity entitle such Holders' legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations and liabilities of the parties
hereto or any of them.
(b) Except with respect to the Investor Certificateholders as
expressly provided in any Pooling and Servicing Agreement, no Holder shall have
any right to vote or in any manner otherwise control the operation and
management of the Trust, or the obligations of the parties hereto. Nor shall any
Holder be under any liability to any third person by reason of any action taken
by the parties to this Agreement pursuant to any provision hereof.
(c) No Holder shall have any right by virtue of any provisions of
this Agreement to institute any suit, action or proceeding in equity or at law
upon or under or with respect to this Agreement, unless such Holder previously
shall have given to the Trustee, written request to institute such action, suit
or proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and the Trustee, for 60 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to initiate any such action, suit or proceeding; it being
understood and intended, and being expressly covenanted by each Holder with
every other Holder and the Trustee, that no one or more Holder shall have any
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Amended and Restated Pooling Agreement 128
right in any manner whatever by virtue or by availing itself or themselves of
any provisions of the Pooling and Servicing Agreements to affect, disturb or
prejudice the rights of any other of the Interests, or to obtain or seek to
obtain priority over or preference to any other such Holder, or to enforce any
right under this Agreement, except in the manner herein provided and for the
equal, ratable and common benefit of all Holders. For the protection and
enforcement of the provisions of this Section 10.03, each and every Holder and
the Trustee shall be entitled to such relief as can be given either at law or in
equity.
(d) By their acceptance of Interests pursuant to this Agreement and
the applicable Supplement, the Holders agree to the provisions of this Section
10.03.
SECTION 10.04. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO ANY CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT ISSUES
OF PERFECTION ARE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION.
SECTION 10.05. Notices. All notices, requests and demands to or upon
the respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or three days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed as follows (i) in the case of the Company, the
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Amended and Restated Pooling Agreement 129
Master Servicer and the Trustee, 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 of Ronald Hoffman and Richard Kennett
Telecopy: (910) 476-4551
with a copy to the Master Servicer
The Master Servicer:
LFI Servicing Corporation
1300 National Highway
Thomasville, North Carolina 27360
Attention of Larry Milan and Richard Kennett
Telecopy: (910) 476-4551
The Trustee:
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10011
Attention of Advanced Structured Products Group
Telecopy: (212) 946-3240
Any notice required or permitted to be mailed to a Holder shall be given by
first-class mail, postage prepaid, at the address of such Holder as shown in the
Certificate Register, the Exchange Register or the Subordinated Interest
Register, as the case may be. Any notice so mailed within the time prescribed in
any Pooling and Servicing Agreement shall be conclusively presumed to have been
duly given, whether or not the Holder receives such notice.
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Amended and Restated Pooling Agreement 130
SECTION 10.06. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of any Pooling and Servicing
Agreement shall for any reason whatsoever be held invalid, then such covenants,
agreements, provisions or terms shall be deemed severable from the remaining
covenants, agreements, provisions or terms of such Pooling and Servicing
Agreement and shall in no way affect the validity or enforceability of the other
provisions of any Pooling and Servicing Agreement or of the Investor
Certificates or rights of the Holders.
SECTION 10.07. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Section 5.03 of the Servicing Agreement,
no Pooling and Servicing Agreement may be assigned by the Company, the Master
Servicer or any Servicer without the prior written consent of the Trustee acting
on behalf of the holders of 66-2/3% of the Invested Amount of each Outstanding
Series and without the Rating Agency Condition having been satisfied with
respect to such assignment.
SECTION 10.08. Investor Certificates Nonassessable and Fully Paid.
It is the intention of the parties to each Pooling and Servicing Agreement that
the Investor Certificateholders shall not be personally liable for obligations
of the Trust, that the interests in the Trust represented by the Investor
Certificates shall be nonassessable for any losses or expenses of the Trust or
for any reason whatsoever and that Investor Certificates upon authentication
thereof by the Trustee pursuant to Section 5.02 are and shall be deemed fully
paid.
SECTION 10.09. Further Assurances. The Company and the Master
Servicer agree to do and perform, from time to time, any and all acts and to
execute any and all further instruments required or reasonably requested by the
Trustee more fully to effect the purposes of each Pooling and Servicing
Agreement, including, without limitation, the execution of any financing
statements or continuation
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Amended and Restated Pooling Agreement 131
statements relating to the Receivables for filing under the provisions of the
UCC of any applicable jurisdiction.
SECTION 10.10. No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Trustee or the Investor
Certificateholders, any right, remedy, power or privilege, hereunder, shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exhaustive of any rights, remedies, powers and privileges provided by law.
SECTION 10.11. Counterparts. This Agreement may be executed in two
or more counterparts (and by different parties on separate counterparts), each
of which shall be an original, but all of which together shall constitute one
and the same instrument.
SECTION 10.12. Third-Party Beneficiaries. This Agreement will inure
to the benefit of and be binding upon the parties hereto, the Holders and their
respective successors and permitted assigns. Except as otherwise provided in
this Section 10.12, no other Person will have any right or obligation hereunder.
SECTION 10.13. Actions by Investor Certificateholders. (a) Wherever
in any Pooling and Servicing Agreement a provision is made that an action may be
taken or a notice, demand or instruction given by Investor Certificateholders,
such action, notice or instruction may be taken or given by any Investor
Certificateholders of any Series, unless such provision requires a specific
percentage of Investor Certificateholders of a certain Series or all Series.
(b) Any request, demand, authorization, direction, notice, consent,
waiver or other act by an
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Amended and Restated Pooling Agreement 132
Investor Certificateholder shall bind such Investor Certificateholder and every
subsequent holder of such Investor Certificate issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done or omitted to be done by the Trustee, the Company, the Master
Servicer or any Servicer in reliance thereon, whether or not notation of such
action is made upon such Investor Certificate.
SECTION 10.14. Merger and Integration. Except as specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement and the Servicing Agreement.
This Agreement and the Servicing Agreement may not be modified, amended, waived,
or supplemented except as provided herein.
SECTION 10.15. Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
SECTION 10.16. Construction of Agreement. (a) The Company hereby
grants to the Trustee, for the benefit of the Holders a security interest in all
of the Company's right, title and interest in, to and under the Receivables and
the other Trust Assets 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 the Company's and the Master
Servicers' obligations hereunder, including, without limitation, the Company's
obligation to sell or transfer Receivables hereafter created to the Trust.
(b) This Agreement shall constitute a security agreement under
applicable law.
SECTION 10.17. No Setoff. Except as expressly provided in this
Agreement or any other Transaction
<PAGE>
Amended and Restated Pooling Agreement 133
Document, the Trustee agrees that it shall have no right of setoff or banker's
lien against, and no right to otherwise deduct from, any funds held in the
Collection Account for any amount owed to it by the Company, the Master
Servicer, any Servicers or any Holder.
SECTION 10.18. No Bankruptcy Petition. Each of the Trustee and the
Master Servicer hereby covenant and agree that, prior to the date which is one
year and one day after the date of the end of the Amortization Period with
respect to all Outstanding Series, 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.
SECTION 10.19. Limitation of Liability. It is expressly understood
and agreed by the parties hereto that (a) each Pooling and Servicing Agreement
is executed and delivered by the Trustee, not individually or personally but
solely as Trustee of the Trust, in the exercise of the powers and authority
conferred and vested in it, (b) except with respect to Section 8.15 hereof the
representations, undertakings and agreements herein made on the part of the
Trust are made and intended not as personal representations, undertakings and
agreements by the Trustee, but are made and intended for the purpose of binding
only the Trust, (c) nothing herein contained shall be construed as creating any
liability on the Trustee, individually or personally, to perform any covenant
either expressed or implied contained herein, all such liability, if any, being
expressly waived by the parties who are signatories to this Agreement and by any
Person claiming by, through or under such parties; provided, however, the
Trustee shall be liable in its individual capacity for its own wilful misconduct
or gross negligence and for any tax assessed against the Trustee based on or
measured by any fees, commission or compensation received by it for acting as
Trustee and (d) under no circumstances shall the Trustee be personally liable
for the payment of any indebtedness or expenses of the Trust or be
<PAGE>
Amended and Restated Pooling Agreement 134
liable for the breach or failure of any obligation, representation, warranty or
covenant made or undertaken by the Trust under any Pooling and Servicing
Agreement; provided further that the foregoing clauses (a) through (d) shall
survive the resignation or removal of the Trustee.
The Company hereby agrees to indemnify and hold harmless the Trustee
and the Trust (for the benefit of the Holders) (each, an "Indemnified Person")
from and against any loss, liability, expense, damage or injury suffered or
sustained by reason of any acts, omissions or alleged acts or omissions arising
out of, or relating to, activities of the Company pursuant to any Pooling and
Servicing Agreement to which it is a party, including but not limited to any
judgment, award, settlement, reasonable attorneys' fees and other reasonable
costs or expenses incurred in connection with the defense of any actual or
threatened action, proceeding or claim, except to the extent such loss,
liability, expense, damage or injury resulted from the gross negligence, bad
faith or wilful misconduct of an Indemnified Person or resulted from the
performance of any Receivable, market fluctuations or other market or investment
risk not attributable to acts or omissions or alleged acts or omissions of the
Company; provided, however, that any payments to be made by the Company pursuant
to this subsection shall be Company Subordinated Obligations.
SECTION 10.20. Certain Information. The Master Servicer and the
Company shall promptly provide to the Trustee such information in computer tape,
hard copy or other form regarding the Receivables as the Trustee may reasonably
determine to be necessary to perform its obligations hereunder.
<PAGE>
Amended and Restated Pooling Agreement 135
IN WITNESS WHEREOF, the Company, the Master Servicer and the Trustee
have caused this Agreement to be duly executed by their respective officers as
of the day and year first above written.
LFI RECEIVABLES CORPORATION,
by_____________________________
Name:
Title:
LFI SERVICING CORPORATION, as
Master Servicer,
by_____________________________
Name:
Title:
THE CHASE MANHATTAN BANK, not
in its individual capacity but
solely as Trustee,
by_____________________________
Name:
Title:
<PAGE>
SCHEDULE 1 to the
AMENDED AND RESTATED
POOLING AGREEMENT
Receivables
Delivered or transmitted via computer tapes, diskettes or data
transmission pursuant to Section 2.01.
<PAGE>
SCHEDULE 2 to the
AMENDED AND RESTATED
POOLING AGREEMENT
Identification of Trust Accounts
The following accounts have been established by and at The Chase
Manhattan Bank:
Name Number
---- ------
Collection Account
Company Collection Subaccount
<PAGE>
SCHEDULE 3 to the
AMENDED AND RESTATED
POOLING AGREEMENT
Location of Chief Executive Office of the Company
LFI Receivables Corporation
1300 National Highway
Thomasville, North Carolina 27360
<PAGE>
Exhibit B to the
AMENDED AND RESTATED
Pooling Agreement
FORM OF ANNUAL OPINION OF COUNSEL
PROVISIONS TO BE INCLUDED
IN ANNUAL OPINION OF COUNSEL DELIVERED PURSUANT TO
SECTION 2.07(b) OF THE POOLING AGREEMENT ON JANUARY ,
OF EACH YEAR COMMENCING WITH JANUARY , 1998
The opinion set forth below, which is to be delivered pursuant to
Section 2.07(b) of the Amended and Restated Pooling Agreement, dated as of
February [4], 1997, among LFI Receivables Corporation, LFI Servicing
Corporation, as Master Servicer, and The Chase Manhattan Bank, as Trustee, may
be subject to certain qualifications, assumptions, limitations and exceptions
taken or made in the opinions of counsel delivered on the Initial Issuance Date
with respect to similar matters. In addition, the opinion may contain the
following qualification as applicable:
With your permission, we have based our opinions set forth in paragraphs
1, 2 and 3 below as they relate to the laws of [states in which the opiner
does not have an office] (each a "UCC State") solely upon our review of
the relevant provisions of Sections 9-102, 9-103, 9-105, 9-106, 9-302,
9-304, 9-306, 9-401, 9-402 and 9-403 [and such additional Sections as the
opiner may determine] of the Uniform Commercial Code as enacted in each
UCC State as set forth in [the CCH Secured Transactions Guide or a similar
compilation]. We have assumed such provisions are presently in effect and
have not been modified in any respect by any other statute, regulation or
court decision with respect to the laws of each such UCC State or
otherwise. We call to your attention that we are not licensed to practice
in any of the UCC States nor do we profess any expertise with respect to
the laws thereof.
1. With respect to the transfer by each Seller to LFI Receivables
Corporation of all of such Seller's right, title and interest in, to and under
the Receivables, Related Property, Collections and all rights (including
<PAGE>
2
rescission, replevin or reclamation) relating to any Receivable originated by
such Seller or arising therefrom (collectively, the "Seller Property") pursuant
to the terms of the Receivables Sale Agreement, dated as of August 5, 1996 (as
amended and restated on February [4], 1997 and as amended, supplemented or
otherwise modified thereafter, the "Receivables Sale Agreement"), among LFI
Receivables Corporation, the Sellers named therein and the Servicers named
therein, no filing or other action, other than such filing or action described
in the [opinions of counsel delivered on the Initial Issuance Date] [or the
opinions delivered on [ ] of the prior year pursuant to Section 2.07(b) of the
Pooling Agreement] with respect to similar matters, is necessary from the date
of such opinions through 90 days into the following calendar year to continue
the perfected and priority status of the interest of LFI Receivables Corporation
in such Seller Property.
2. With respect to the transfer by LFI Receivables Corporation to
the Trust of all of LFI Receivables Corporation's right, title and interest in,
to and under the Receivables and the other Trust Assets (as defined in the
Pooling Agreement) (collectively, the "Trust Property") pursuant to the terms of
the Pooling Agreement, no filing or other action, other than such filing or
action described in the [opinions of counsel delivered on the initial Issuance
Date] [or the opinions delivered on [ ] of the prior year pursuant to Section
2.07(b) of the Pooling Agreement] with respect to similar matters is necessary
from the date of such opinions through 90 days into the following calendar year
to continue the perfected and priority status of the interest of the Trust in
such Trust Property.
3. Set forth on Schedule __ to this opinion is a list of all UCC
Financing Statements which have been filed by each Seller relating to the Seller
Property and by LFI Receivables Corporation relating to the Trust Property and
the earliest and latest date under the applicable UCC on
<PAGE>
3
which continuation statements may be filed for each such financing statement.(1)
- ----------
(1) In the event that the earliest date for filing any continuation
statement occurs prior to January 30 of the following year, such opinion shall
also be delivered to each Seller, LFI Receivables Corporation and the Servicers
with a notice stating that such continuation statements shall be filed on such
earliest date.
<PAGE>
Exhibit B to the
AMENDED AND RESTATED
Pooling Agreement
FORM OF ANNUAL OPINION OF COUNSEL
PROVISIONS TO BE INCLUDED
IN ANNUAL OPINION OF COUNSEL DELIVERED PURSUANT TO
SECTION 2.07(b) OF THE POOLING AGREEMENT ON JANUARY ,
OF EACH YEAR COMMENCING WITH JANUARY , 1998
The opinion set forth below, which is to be delivered pursuant to
Section 2.07(b) of the Amended and Restated Pooling Agreement, dated as of
February [4], 1997, among LFI Receivables Corporation, LFI Servicing
Corporation, as Master Servicer, and The Chase Manhattan Bank, as Trustee, may
be subject to certain qualifications, assumptions, limitations and exceptions
taken or made in the opinions of counsel delivered on the Initial Issuance Date
with respect to similar matters. In addition, the opinion may contain the
following qualification as applicable:
With your permission, we have based our opinions set forth in paragraphs
1, 2 and 3 below as they relate to the laws of [states in which the opiner
does not have an office] (each a "UCC State") solely upon our review of
the relevant provisions of Sections 9-102, 9-103, 9-105, 9-106, 9-302,
9-304, 9-306, 9-401, 9-402 and 9-403 [and such additional Sections as the
opiner may determine] of the Uniform Commercial Code as enacted in each
UCC State as set forth in [the CCH Secured Transactions Guide or a similar
compilation]. We have assumed such provisions are presently in effect and
have not been modified in any respect by any other statute, regulation or
court decision with respect to the laws of each such UCC State or
otherwise. We call to your attention that we are not licensed to practice
in any of the UCC States nor do we profess any expertise with respect to
the laws thereof.
1. With respect to the transfer by each Seller to LFI Receivables
Corporation of all of such Seller's right, title and interest in, to and under
the Receivables, Related Property, Collections and all rights (including
<PAGE>
2
rescission, replevin or reclamation) relating to any Receivable originated by
such Seller or arising therefrom (collectively, the "Seller Property") pursuant
to the terms of the Receivables Sale Agreement, dated as of August 5, 1996 (as
amended and restated on February [4], 1997 and as amended, supplemented or
otherwise modified thereafter, the "Receivables Sale Agreement"), among LFI
Receivables Corporation, the Sellers named therein and the Servicers named
therein, no filing or other action, other than such filing or action described
in the [opinions of counsel delivered on the Initial Issuance Date] [or the
opinions delivered on [ ] of the prior year pursuant to Section 2.07(b) of the
Pooling Agreement] with respect to similar matters, is necessary from the date
of such opinions through 90 days into the following calendar year to continue
the perfected and priority status of the interest of LFI Receivables Corporation
in such Seller Property.
2. With respect to the transfer by LFI Receivables Corporation to
the Trust of all of LFI Receivables Corporation's right, title and interest in,
to and under the Receivables and the other Trust Assets (as defined in the
Pooling Agreement) (collectively, the "Trust Property") pursuant to the terms of
the Pooling Agreement, no filing or other action, other than such filing or
action described in the [opinions of counsel delivered on the initial Issuance
Date] [or the opinions delivered on [ ] of the prior year pursuant to Section
2.07(b) of the Pooling Agreement] with respect to similar matters is necessary
from the date of such opinions through 90 days into the following calendar year
to continue the perfected and priority status of the interest of the Trust in
such Trust Property.
3. Set forth on Schedule __ to this opinion is a list of all UCC
Financing Statements which have been filed by each Seller relating to the Seller
Property and by LFI Receivables Corporation relating to the Trust Property and
the earliest and latest date under the applicable UCC on
<PAGE>
3
which continuation statements may be filed for each such financing statement.(1)
- ----------
(1) In the event that the earliest date for filing any continuation
statement occurs prior to January 30 of the following year, such opinion shall
also be delivered to each Seller, LFI Receivables Corporation and the Servicers
with a notice stating that such continuation statements shall be filed on such
earliest date.
<PAGE>
EXHIBIT B-1 to the
POOLING AGREEMENT
[FORM OF LOCKBOX AGREEMENT]
, 1996
[Name and address of Lockbox Bank]
Attention:
Ladies and Gentlemen:
LFI Receivables Corporation, a Delaware corporation (the "Company"),
has agreed to purchase certain receivables (the "Receivables") from a number of
Sellers (the "Sellers", and in their capacity as servicers pursuant to the
Transaction Documents, the "Servicers") pursuant to the Receivables Sale
Agreement, dated as of August 5, 1996 (as amended, supplemented or otherwise
modified from time to time, the "Receivables Sale Agreement"), among the
Sellers, the Servicers and the Company. The Company has in turn assigned the
Receivables to a master trust (the "Master Trust") pursuant to a Pooling
Agreement, dated as of August 5, 1996 (as amended, supplemented or otherwise
modified from time to time, the "Pooling Agreement"), among the Company, LFI
Servicing Corporation, as master servicer (in such capacity, the "Master
Servicer") and The Chase Manhattan Bank, a New York banking corporation, as
trustee (the "Trustee"). The Receivables are serviced pursuant to the terms of a
Servicing Agreement, dated as of August 5, 1996 (as the same may be amended,
supplemented or otherwise modified from time to time, the "Servicing Agreement";
and, collectively with the Pooling Agreement, the "Pooling and Servicing
Agreements") among the Company, the Servicers, the Master Servicer and the
Trustee. Capitalized terms used herein but not defined herein shall have the
meanings assigned to such terms in the Pooling Agreement.
<PAGE>
2
Pursuant to the terms of the Pooling and Servicing Agreements and
except as otherwise provided therein, (i) each of the Servicers has agreed to
instruct all Obligors under the Receivables originated by it as Seller to make
all payments in respect of such Receivables to a blocked deposit account (each,
a "Lockbox Account") designated by such Servicer to such Obligor and (ii) the
Company has agreed to grant a security interest in its right, title and interest
in each Lockbox Account and all funds and other evidences of payment held
therein to the Trustee. Furthermore, the Company, the Master Servicer, each of
the Servicers and the Trustee have agreed, pursuant to the Pooling and Servicing
Agreements, to enter into an agreement with each bank maintaining a Lockbox
Account and hereby request that [name of Lockbox Bank] (the "Lockbox Bank") act
as, and the Lockbox Bank hereby agrees to act as, a lockbox deposit bank for the
Company with respect to the Lockbox Account. This Letter Agreement defines
certain rights and obligations with respect to the appointment of the Lockbox
Bank.
Accordingly, the Company, the Master Servicer, the Servicer party
hereto, the Trustee and the Lockbox Bank agree as follows:
Reference is made to the Lockbox Account (Account No.___________),
including box number ____________ thereunder (collectively, the "Specified
Account"), maintained with you by the related Servicer. The related Servicer
hereby transfers the Specified Account to the Company and hereafter the
Specified Account shall be in the name of the Company and maintained by the
Lockbox Bank for the benefit of the Company and the Trustee, as set forth
herein. All funds and other evidences of payment received by the Lockbox Bank in
its capacity as Lockbox Bank shall be deposited in the Specified Account. Such
payments shall not be commingled with other funds. All funds and other evidences
of payment at any time on deposit in the Specified Account shall be held by the
Lockbox Bank for application strictly in accordance with the terms of this
Letter Agreement. The Lockbox Bank agrees to give the Trustee, the Company, the
<PAGE>
3
Master Servicer and the related Servicer prompt notice if the Specified Account
shall become subject to any writ, judgment, warrant of attachment, execution or
similar process.
The Trustee shall have sole and exclusive dominion over and control
of the Specified Account and all Collections and other property from time to
time deposited therein, and shall have the sole right of withdrawal from the
Specified Account. Each of the Company, the Master Servicer and the related
Servicer acknowledges and agrees that it shall not have any dominion over or
control of the Specified Account or any Collections or other property from time
to time deposited therein including any right to withdraw or utilize any funds
or other evidences of payment on deposit in the Specified Account, other than
the right to authorize transfers to the Collection Account as set forth herein
and pursuant to the terms of the Pooling and Servicing Agreements. The Lockbox
Bank shall automatically, by 1:00 p.m., New York City time, at least as often as
once each day that is a business day for the Lockbox Bank and for the Trustee,
transfer, by means of the Automated Clearing House System, all available funds
on deposit in the Specified Account, including all funds transferred from
Obligors on or before the end of the preceeding day, along with, subject to the
next succeeding sentence, all remittance advisements and payment invoices on
deposit therein, to the Collection Account. The Lockbox Bank acknowledges that,
until it receives instructions from the Trustee to the contrary, the Lockbox
Bank shall return to the Company, upon the Company's reasonable request
therefor, any remittance advisements and payment invoices deposited into the
Specified Account.
Deposited checks with respect to the Specified Account returned to
the Lockbox Bank for any reason will be charged against the Specified Account.
Nothing contained in the previous sentence shall be construed to prejudice other
rights of the Lockbox Bank, which rights include the right
<PAGE>
4
of recourse against the Company for any overdrafts in the Specified Account.
The Trustee is authorized to receive mail delivered to the Lockbox
Bank with respect to the Specified Account and the Company has filed a form of
standing delivery order with the United States Postal Service authorizing the
Trustee to receive mail delivered to the Lockbox Bank with respect to the
Specified Account.
The Lockbox Bank shall also furnish the Trustee with statements, in
the form and manner typical for the Lockbox Bank, of amounts of deposits in, and
amounts transferred to the Collection Account from, the Specified Account
pursuant to any reasonable request of the Trustee but in any event not less
frequently than monthly and such other information relating to the Specified
Account at such times as shall be reasonably requested by the Trustee.
For purposes of this Letter Agreement, any officer of the Trustee
shall be authorized to act, and to give instructions and notice, on behalf of
the Trustee hereunder.
The fees for the services of the Lockbox Bank shall be mutually
agreed upon between the Company and the Lockbox Bank and paid by the Company.
Neither the Trustee nor any investor in the Master Trust shall have any
responsibility or liability for the payment of any such fee.
The Lockbox Bank may perform any of its duties hereunder by or
through its officers, employees or agents and shall be entitled to rely upon the
advice of counsel as to its duties. The Lockbox Bank shall not be liable to the
Trustee, the Master Servicer, any Servicer or the Company for any action taken
or omitted to be taken by it in good faith, nor shall the Lockbox Bank be
responsible to the Trustee, the Master Servicer, any Servicer or the Company for
the consequences of any oversight or error of judgment or be answerable to the
Trustee for the same, unless such action, omission, oversight or error of
judgment shall
<PAGE>
5
happen through the Lockbox Bank's negligence or willful misconduct.
The Lockbox Bank hereby represents and warrants that (a) it is a
banking corporation duly organized, validly existing and in good standing under
the laws of [ ] and has full corporate power and authority under such laws to
execute, deliver and perform its obligations under this Agreement and (b) the
execution, delivery and performance of this Agreement by the Lockbox Bank have
been duly and effectively authorized by all necessary coporate action and this
Agreement has been duly executed and delivered by the Lockbox Bank and
constitutes a valid and binding obligation of the Lockbox Bank enforceable in
accordance with its terms.
The Lockbox Bank may resign at any time as Lockbox Bank hereunder by
delivery to the Trustee and the Company of written notice of resignation not
less than 30 days prior to the effective date of such resignation. The Company
may, with the written consent of the Trustee, and, if the Company shall refuse
any demand by the Trustee to do so in the event (i) an Early Amortization Event
shall occur and be continuing or (ii) there has been a failure by the Lockbox
Bank to perform any of its material obligations hereunder and such failure could
adversely affect the Trustee's interest in any Receivable or the Trustee's
rights, or ability to exercise any remedies, under this Letter Agreement or the
Pooling and Servicing Agreements, the Trustee may close the Specified Account at
any time by delivery of notice to the Lockbox Bank and the Company at the
addresses appearing below. This Letter Agreement shall terminate upon receipt of
such notice of closing, or delivery of such notice of resignation, except that
the Lockbox Bank shall immediately transfer to the Collection Account, or any
other account designated by the Trustee all available funds or, subject to the
Company's reasonable request to retain such items, any remittance advisements or
payment invoices, if any, then on deposit in, or otherwise to the credit of, the
Specified Account and deliver any
<PAGE>
6
available funds or such remittance advisements or payment invoices relating to
the Receivables received by the Lockbox Bank after such notice directly to the
Collection Account or any other account designated by the Trustee.
All notices and communications hereunder shall be in writing (except
where telephonic instructions or notices are authorized herein) and shall be
deemed to have been received and shall be effective on the day on which
delivered (including delivery by telex):
(i) in the case of the Trustee, to it at:
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, NY 10011
Attention: Advanced Structured Products
Group
Telecopy No.: (212) 946-3240
(ii) in the case of the Lockbox Bank, to it at:
Attention:
Telecopy No.:
(iii) in the case of the Company, to it at:
LFI Receivables Corporation
1300 National Highway
Thomasville, NC 27360
Attention: Larry Milan and Richard Kennett
Telecopy No.: (910) 476-4551
<PAGE>
7
(iv) in the case of the Master Servicer, to it at:
LFI Servicing Corporation
1300 National Highway
Thamasville, NC 27360
Attention: Larry Milan and Richard Kennett
Telecopy No.: (910) 476-4551
(v) in the case of the Servicer party hereto, to it at:
Attention:
Telecopy No.:
The Lockbox Bank shall not assign or transfer any of its rights or
obligations hereunder (other than to the Trustee) without the prior written
consent of the Trustee. Notwithstanding anything herein to the contrary, upon
the succession of the Master Servicer to the Servicer party hereto in accordance
with and under the [Servicing Agreement], the Master Servicer shall succeed to,
and be substituted for, and may exercise every right and power of, the Servicer
party hereto under this Letter Agreement with the same effect as if the Master
Servicer had been named as the Servicer party hereto. This Letter Agreement may
be amended only by a written instrument executed by the Company, the Master
Servicer, the Servicer party hereto, the Trustee and the Lockbox Bank, acting by
their representative officers thereunto duly authorized. Except with respect to
the amount of its fees payable hereunder, the Lockbox Bank hereby
unconditionally and irrevocably waives (so long as the Pooling and Servicing
Agreements are in effect) any rights of setoff or banker's lien against, or to
otherwise deduct from, any funds or other evidences of payment held in any
Specified Account for any indebtedness or other claim owed by the Company, the
Master Servicer or any Servicer to the Lockbox Bank.
THIS LETTER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
<PAGE>
8
YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY
INTEREST OR REMEDIES HEREUNDER IN RESPECT OF ANY RECEIVABLE MAY BE GOVERNED BY
THE LAW OF A JURISDICTION OTHER THAN NEW YORK.
This Letter Agreement (i) shall inure to the benefit of, and be
binding upon, the Company, the Servicers, the Master Servicer, the Trustee, the
Lockbox Bank and their respective successors and assigns and (ii) may be
executed in two or more counterparts, each of which shall be deemed an original
but all of which together shall constitute one and the same instrument. Delivery
of an executed counterpart of a signature page to this Letter Agreement by
facsimile transmission shall be effective as delivery of a manually executed
counterpart of this Letter Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Letter
Agreement to be executed by their duly authorized officers as of the date first
above written.
Very truly yours,
LFI RECEIVABLES CORPORATION,
by __________________________
Title:
[ ], as Servicer,
by __________________________
Title:
<PAGE>
9
LFI SERVICING CORPORATION, as Master
Servicer,
by __________________________
Title:
Agreed to and accepted:
[NAME OF LOCKBOX BANK],
as Lockbox Bank
by ___________________________
Title:
THE CHASE MANHATTAN BANK, as Trustee
by ___________________________
Title:
<PAGE>
Exhibit 10.8
================================================================================
LFI RECEIVABLES MASTER TRUST
SERIES 1997-1 SUPPLEMENT
Dated as of February 4, 1997
to
AMENDED AND RESTATED
POOLING AGREEMENT
Dated as of February 4, 1997
Among
LFI RECEIVABLES CORPORATION,
LFI SERVICING CORPORATION,
as Master Servicer
and
THE CHASE MANHATTAN BANK,
as Trustee
================================================================================
<PAGE>
TOC Series 1997-1 Supplement
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
SECTION 1.01. Definitions.............................................. 2
ARTICLE II
Designation of Term Certificates; Purchase and Sale
of the Term Certificates
SECTION 2.01. Designation.............................................. 27
SECTION 2.02. The Term Certificates and
Series 1997-1 Subordinated
Interest............................................... 27
SECTION 2.03. Delivery................................................. 28
SECTION 2.04. Restrictions on Transfer................................. 30
SECTION 2.05. Application of Proceeds.................................. 36
SECTION 2.06. Procedure for Decreasing the
Invested Amount; Optional
Termination............................................ 37
SECTION 2.07. Sale of Additional Term Certificates..................... 38
ARTICLE III
Article III of the Agreement
SECTION 3A.02. Establishment of Trust Accounts.......................... 41
SECTION 3A.03. Daily Allocations........................................ 43
SECTION 3A.04. Determination of Interest................................ 46
SECTION 3A.05. Determination of Series 1997-1
Principal.............................................. 49
SECTION 3A.06. Applications............................................. 52
<PAGE>
TOC Series 1997-1 Supplement 2
Page
----
ARTICLE IV
Distributions and Reports
SECTION 4A.01. Distributions............................................ 57
SECTION 4A.02. Statements and Notices................................... 57
SECTION 4A.03. Notices.................................................. 59
ARTICLE V
Additional Early Amortization Events
SECTION 5.01. Additional Early Amortization
Events................................................. 59
ARTICLE VI
Servicing Fee
SECTION 6.01. Servicing Compensation................................... 64
ARTICLE VII
Covenants, Representations and Warranties
SECTION 7.01. Representations and Warranties of
the Company and the Master
Servicer............................................... 65
SECTION 7.02. Covenants of the Company and the
Master Servicer........................................ 65
SECTION 7.03. Negative Covenant of the Company;
Covenants of the Master Servicer....................... 66
SECTION 7.04. Covenant of the Trustee.................................. 67
<PAGE>
Page
----
ARTICLE VIII
Miscellaneous
SECTION 8.01. Ratification of Agreement................................ 67
SECTION 8.02. Governing Law............................................ 67
SECTION 8.03. Further Assurances....................................... 68
SECTION 8.04. No Waiver; Cumulative Remedies........................... 68
SECTION 8.05. Amendments............................................... 68
SECTION 8.06. Notices.................................................. 69
SECTION 8.07. Counterparts............................................. 70
SECTION 8.08. No Bankruptcy Petition................................... 70
SECTION 8.09. Limitation on Addition and
Termination of Sellers................................. 70
ARTICLE IX
Final Distributions
SECTION 9.01. Certain Distributions.................................... 72
EXHIBITS
Exhibit A Form of Class A Certificate, Series 1997-1
Exhibit B Form of Class B Certificate, Series 1997-1
Exhibit C Form of Class C Certificate, Series 1997-1
Exhibit D Form of Daily Report
Exhibit E Form of Monthly Settlement Statement
Exhibit F Form of Purchaser Letter
Exhibit G Form of Class C Transferee Tax Letter
SCHEDULES
Schedule 1 Trust Accounts
<PAGE>
Series 1997-1 Supplement
SERIES 1997-1 SUPPLEMENT dated as of February 4, 1997
(this "Supplement"), among LFI RECEIVABLES CORPORATION, a
Delaware corporation (the "Company"), LFI SERVICING
CORPORATION, a Delaware corporation, as master servicer (the
"Master Servicer"), and THE CHASE MANHATTAN BANK, a New York
banking corporation, as trustee (the "Trustee") under the
Agreement.
W I T N E S S E T H :
WHEREAS, the parties hereto have entered into the Amended and
Restated Pooling Agreement, dated as of February 4, 1997 (the "Agreement");
WHEREAS, the Agreement provides, among other things, that the
Company, the Master Servicer and the Trustee may at any time and from time to
time enter into supplements to the Agreement for the purpose of authorizing the
issuance on behalf of the Trust by the Company for execution and redelivery to
the Trustee for authentication of one or more Series of Investor Certificates;
and
WHEREAS, the Company, the Master Servicer and the Trustee wish to
supplement the Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby expressly acknowledged, the parties
hereto agree as follows:
<PAGE>
Series 1997-1 Supplement 2
ARTICLE I
Definitions
SECTION 1.01. Definitions. (a) The following words and phrases shall
have the following meanings with respect to Series 1997-1 and the definitions of
such terms are applicable to the singular as well as the plural form of such
terms and to the masculine as well as the feminine and neuter genders of such
terms:
"Accrual Period" shall mean, with respect to Series 1997-1, the
period from and including a Distribution Date to but excluding the succeeding
Distribution Date; provided that in the case of the initial Accrual Period, it
shall mean the period from and including the Issuance Date to but excluding
March 17, 1997.
"Accrued Expense Adjustment" shall mean, for any Business Day during
an Accrual Period, the amount, if any, which may be less than zero, equal to the
difference between (i) the entire amount of (A) the Series 1997-1 Monthly
Interest to be distributed on the next succeeding Distribution Date, (B) the
aggregate amount of all previously accrued, unpaid and unallocated Series 1997-1
Monthly Interest for prior Distribution Dates, (C) the aggregate amount of all
accrued, unpaid and unallocated Class A Additional Interest, Class B Additional
Interest and Class C Additional Interest, (D) the Series 1997-1 Monthly
Servicing Fee and (E) all accrued Program Costs, in each case for such Accrual
Period determined as of such day, and (ii) the aggregate of the amounts
transferred to the Series 1997-1 Non-Principal Collection Sub-subaccount on or
before such day in respect of such Accrual Period pursuant to subsection
3A.03(b)(i), before giving effect to any transfer made in respect of the Accrued
Expense Adjustment on such day pursuant to the further proviso to such
subsection.
"Accrued Expense Amount" shall mean, for each Business Day during an
Accrual Period, the sum of (a) the
<PAGE>
Series 1997-1 Supplement 3
Series 1997-1 Daily Interest Expense determined as of such Business Day, (b) in
the case of each of the first ten Business Days in the Accrual Period, one-tenth
of the Series 1997-1 Monthly Servicing Fee (up to the amount thereof due and
payable on the succeeding Distribution Date, but subject to Accrued Expense
Adjustments as provided in subsection 3A.03(b)(i)) and (c) all Program Costs
that have accrued since the preceding Business Day.
"Aged Receivables Ratio" shall mean, as of the last day of each
Settlement Period, the percentage equivalent of a fraction, the numerator of
which shall be the sum of (a) the aggregate unpaid balance of Receivables
originated by the Sellers that were 91 to 120 days past due and (b) the
aggregate amount of Receivables of the Sellers that were charged off as
uncollectible prior to the day that is 91 days after its original due date
during such Settlement Period, and the denominator of which shall be the
aggregate Principal Amount of Receivables originated by the Sellers during the
fourth prior Settlement Period (including the Settlement Period ended on such
day).
"Aggregate Commitment Amount" shall have the meaning set forth in
Section 1.01 of the Series 1997-2 Supplement.
"Carrying Cost Reserve Ratio" shall mean, as of any Settlement
Report Date and continuing until (but not including) the next Settlement Report
Date, an amount (expressed as a percentage) equal to (a) the product of (i) 2.0
times Days Sales Outstanding as of such day and (ii) 1.50 times the Discount
Rate as of such day, divided by (b) 360.
"Change in Control" shall mean the occurrence of any event the
result of which causes Lifestyle Holdings Ltd. or the Company not to be a,
direct or indirect, wholly owned Subsidiary of Lifestyle Furnishings
International Ltd.
<PAGE>
Series 1997-1 Supplement 4
"Class A Additional Interest" shall have the meaning assigned in
subsection 3A.04(b)(i).
"Class A Adjusted Invested Amount" shall mean, on any date of
determination, the Class A Invested Amount minus the amount on deposit in the
Series 1997-1 Principal Collection Sub-subaccount up to a maximum of the Class A
Invested Amount.
"Class A Certificate" shall mean a Class A Certificate, Series
1997-1, executed by the Company and authenticated by or on behalf of the
Trustee, substantially in the form of Exhibit A.
"Class A Certificateholder" shall mean each holder of a Class A
Certificate.
"Class A Certificate Rate" shall mean, (a) with respect to (i) the
initial Accrual Period, 5.655% per annum, and (ii) any Accrual Period
thereafter, One-Month LIBOR for such Accrual Period plus 0.185% per annum and
(b) in the case of any additional Class A Certificates issued pursuant to
Section 2.07, the rate per annum set forth in the written direction delivered by
the Company to the Trustee pursuant to subsection 2.07(c).
"Class A Initial Invested Amount" shall mean $120,000,000.
"Class A Interest Shortfall" shall have the meaning assigned in
subsection 3A.04(b)(i).
"Class A Invested Amount" shall mean, with respect to any date of
determination, an amount equal to (i) the Class A Initial Invested Amount (plus
the initial invested amount of any Class A Certificate issued subsequent to the
Issuance Date) minus (ii) the aggregate amount of distributions to the Class A
Certificateholders (including the holders of any such subsequently issued Class
A Certificates) made in respect of principal on or prior to
<PAGE>
Series 1997-1 Supplement 5
such date minus (iii) the aggregate Series 1997-1 Allocable Charged-Off Amount
applied to the Class A Certificates on or prior to such date pursuant to
subsection 3A.05(b)(iv) plus (iv) (but only to the extent of any unreimbursed
reductions made pursuant to clause (iii) above) the aggregate Series 1997-1
Allocable Recoveries Amount applied to the Class A Certificates on or prior to
such date pursuant to subsection 3A.05(c)(i).
"Class A Monthly Interest" shall have the meaning assigned in
subsection 3A.04(a)(i).
"Class A Ratio" shall mean, on any date of determination with
respect to the Class A Certificates, the greatest of (i) the sum of the Loss
Reserve Ratio I and the Dilution Reserve Ratio I, (ii) the sum of the Loss
Reserve Ratio II and the Dilution Reserve Ratio II and (iii) the Minimum Ratio,
in each case applicable to Class A Certificates.
"Class B Additional Interest" shall have the meaning assigned in
subsection 3A.04(b)(ii).
"Class B Adjusted Invested Amount" shall mean, on any date of
determination, the Class B Invested Amount minus the excess, if any, of the
amount on deposit on such date in the Series 1997-1 Principal Collection
Sub-subaccount over the Class A Invested Amount up to a maximum of the Class B
Invested Amount.
"Class B Certificate" shall mean a Class B Certificate, Series
1997-1, executed by the Company and authenticated by or on behalf of the
Trustee, substantially in the form of Exhibit B.
"Class B Certificateholder" shall mean each holder of a Class B
Certificate.
"Class B Certificate Rate" shall mean, (a) with respect to (i) the
initial Accrual Period, 5.850% per annum,
<PAGE>
Series 1997-1 Supplement 6
and (ii) any Accrual Period thereafter, One-Month LIBOR for such Accrual Period
plus 0.38% per annum and (b) in the case of any additional Class B Certificates
issued pursuant to Section 2.07, the rate per annum set forth in the written
direction delivered by the Company to the Trustee pursuant to subsection
2.07(c).
"Class B Initial Invested Amount" shall mean $15,000,000.
"Class B Interest Shortfall" shall have the meaning assigned in
subsection 3A.04(b)(ii).
"Class B Invested Amount" shall mean, with respect to any date of
determination, an amount equal to (i) the Class B Initial Invested Amount (plus
the initial invested amount of any Class B Certificates issued subsequent to the
Issuance Date) minus (ii) the aggregate amount of distributions to the Class B
Certificateholders (including the holders of any such subsequently issued Class
B Certificates) made in respect of principal on or prior to such date minus
(iii) the aggregate Series 1997-1 Allocable Charged-Off Amount applied to the
Class B Certificates on or prior to such date pursuant to subsection
3A.05(b)(iii) plus (iv) (but only to the extent of any unreimbursed reductions
made pursuant to clause (iii) above) the aggregate Series 1997-1 Allocable
Recoveries Amount applied to the Class B Certificates on or prior to such date
pursuant to subsection 3A.05(c)(ii).
"Class B Monthly Interest" shall have the meaning assigned in
subsection 3A.04(a)(ii).
"Class B Ratio" shall mean, on any date of determination with
respect to the Class B Certificates, the greatest of (i) the sum of the Loss
Reserve Ratio I and the Dilution Reserve Ratio I, (ii) the sum of the Loss
Reserve Ratio II and the Dilution Reserve Ratio II and (iii) the Minimum Ratio,
in each case applicable to Class B Certificates.
<PAGE>
Series 1997-1 Supplement 7
"Class C Additional Interest" shall have the meaning assigned in
subsection 3A.04(b)(iii).
"Class C Adjusted Invested Amount" shall mean, on any date of
determination, the Class C Invested Amount minus the excess, if any, of the
amount on deposit on such date in the Series 1997-1 Principal Collection
Sub-subaccount over the Class A Invested Amount and the Class B Invested Amount
up to a maximum of the Class C Invested Amount.
"Class C Certificate" shall mean a Class C Certificate, Series
1997-1, executed by the Company and authenticated by or on behalf of the
Trustee, substantially in the form of Exhibit C.
"Class C Certificateholder" shall mean each holder of a Class C
Certificate.
"Class C Certificate Rate" shall mean, (a) with respect to (i) the
initial Accrual Period, 6.095% per annum, and (ii) any Accrual Period
thereafter, One-Month LIBOR for such Accrual Period plus 0.625% per annum and
(b) in the case of any additional Class C Certificates issued pursuant to
Section 2.07, the rate per annum set forth in the written direction delivered by
the Company to the Trustee pursuant to subsection 2.07(c).
"Class C Initial Invested Amount" shall mean $15,000,000.
"Class C Interest Shortfall" shall have the meaning assigned in
subsection 3A.04(b)(iii).
"Class C Invested Amount" shall mean, with respect to any date of
determination, an amount equal to (i) the Class C Initial Invested Amount (plus
the initial invested amount of any Class C Certificates issued subsequent to the
Issuance Date) minus (ii) the aggregate amount of distributions to the Class C
Certificateholders (including the holders of any such subsequently issued Class
C
<PAGE>
Series 1997-1 Supplement 8
Certificates) made in respect of principal on or prior to such date minus (iii)
the aggregate Series 1997-1 Allocable Charged-Off Amount applied to the Class C
Certificates on or prior to such date pursuant to subsection 3A.05(b)(ii) plus
(iv) (but only to the extent of any unreimbursed reductions made pursuant to
clause (iii) above) the aggregate Series 1997-1 Allocable Recoveries Amount
applied to the Class C Certificates on or prior to such date pursuant to
subsection 3A.05(c)(iii).
"Class C Monthly Interest" shall have the meaning assigned in
subsection 3A.04(a)(iii).
"Class C Ratio" shall mean, on any date of determination with
respect to the Class C Certificates, the greatest of (i) the sum of the Loss
Reserve Ratio I and the Dilution Reserve Ratio I, (ii) the sum of the Loss
Reserve Ratio II and the Dilution Reserve Ratio II and (iii) the Minimum Ratio,
in each case applicable to Class C Certificates.
"Class C Transferee Tax Letter" shall mean a Class C Transferee Tax
Letter in substantially the form attached hereto as Exhibit G.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Daily Report" shall mean a report prepared by the Master Servicer
on each Business Day for the period specified therein, in substantially the form
of Exhibit D.
"Days Sales Outstanding" shall mean, as of any Settlement Report
Date and continuing until the next Settlement Report Date, the number of days
equal to the product of (i) 91 and (ii) the amount obtained by dividing (A) the
aggregate Principal Amount of Eligible Receivables as at the last day of the
Settlement Period immediately preceding such earlier Settlement Report Date, by
(B) the aggregate Principal Amount of Receivables generated by the
<PAGE>
Series 1997-1 Supplement 9
Sellers for the three Settlement Periods immediately preceding such earlier
Settlement Report Date.
"Depository" shall mean The Depository Trust Company, the nominee of
which is Cede & Co., or any successor thereto.
"Depository Participant" shall mean a broker, dealer, bank, other
financial institution or other Person for whom from time to time the Depository
effects book-entry transfers and pledges of securities deposited with the
Depository.
"Dilution Horizon" shall mean the number of days from the invoicing
of a Receivable until a Dilution Adjustment with respect to such Receivable is
issued by the related Seller or the related Seller becomes aware of the fact
that a Dilution Adjustment will have to be issued in respect of such Receivable;
provided, however, that in no event shall the Dilution Horizon be less than 30
days.
"Dilution Horizon Factor" shall mean (a) for the period from the
Issuance Date until the sixth Settlement Report Date to occur thereafter, 3.167
and (b) for each six-month period to occur after such initial period, a
fraction, the numerator of which is the dollar weighted average Dilution Horizon
of the Sellers (based upon the Dilution Adjustment of the selected Receivables)
for such period (which shall be calculated by the related Servicer, in
accordance with its past procedures for such calculations, selecting a random
sample of approximately 200 Dilution Adjustment memos from each Seller created
during such period and determining the Dilution Horizon therefrom) and the
denominator of which is 30; provided, however, that the numerator used to
calculate the Dilution Horizon Factor shall in no event be less than 30;
provided, further, that if the Dilution Horizon Factor for any period is less
than the Dilution Horizon Factor for the immediately preceding period, then the
actual Dilution Horizon Factor for such current period shall be recalculated to
equal a fraction,
<PAGE>
Series 1997-1 Supplement 10
the numerator of which is equal to the average of the numerators used to
calculate the Dilution Horizon Factor for such immediately preceding period and
such current period (but not less than 30) and the denominator of which is 30.
"Dilution Period" shall mean as of any Settlement Report Date and
continuing until (but not including) the next Settlement Report Date), the
quotient of (i) the product of (A) the aggregate Principal Amount of Receivables
that were originated by the Sellers during the Settlement Period preceding such
earlier Settlement Report Date and (B) the Dilution Horizon Factor and (ii) the
Aggregate Receivables Amount as of the last day of the Settlement Period
preceding such earlier Settlement Report Date.
"Dilution Ratio" shall mean, as of the last day of each Settlement
Period, an amount (expressed as a percentage) equal to the aggregate amount of
Dilution Adjustments made during such Settlement Period divided by the aggregate
Principal Amount of Receivables that were originated by the Sellers during the
second prior Settlement Period (including the Settlement Period ended on such
day).
"Dilution Reserve Ratio I" shall mean, as of any Settlement Report
Date and continuing until (but not including) the next Settlement Report Date,
an amount (expressed as a percentage) that is calculated for the Class A
Certificates, the Class B Certificates or the Class C Certificates, as the case
may be, as follows:
DRR = [(c * d) + [(e-d) * (e/d)]] * f
Where:
DRR = Dilution Reserve Ratio I;
c = with respect to Class A Certificates, 2.5, with respect to Class B
Certificates, 2.0 and with respect to the Class C Certificates, 1.5;
<PAGE>
Series 1997-1 Supplement 11
d = the three-month rolling average of the Dilution
Ratio that occurred during the period of three
consecutive Settlement Periods ending immediately
prior to such earlier Settlement Report Date;
provided, however, that if the Dilution Horizon is
(i) at least two but less than three, "d" shall
equal the two-month rolling average of the
Dilution Ratio that occurred during the period of
two consecutive Settlement Periods ending
immediately prior to such earlier Settlement
Report Date or (ii) less than two, "d" shall equal
the Dilution Ratio for the Settlement Period
ending immediately prior to such earlier
Settlement Report Date;
e = the highest three-month rolling average of the Dilution Ratio
that occurred during the period of twelve consecutive Settlement
Periods ending prior to such earlier Settlement Report Date;
provided, however, that if the Dilution Horizon is (i) at least two
but less than three, "e" shall equal the highest two-month rolling
average of the Dilution Ratio that occurred during the period of
twelve consecutive Settlement Periods ending prior to such earlier
Settlement Report Date or (ii) less than two, "e" shall equal the
highest Dilution Ratio for any Settlement Period during the period
of twelve consecutive Settlement Periods ending prior to such
earlier Settlement Report Date; and
f = the Dilution Period.
"Dilution Reserve Ratio II" shall mean, as of any Settlement Report
Date and continuing until (but not including) the next Settlement Report Date,
an amount (expressed as a percentage) that is calculated for the Class A
Certificates, the Class B Certificates or the Class C Certificates, as the case
may be, as follows:
DRR = [(c * d) + e] * f
<PAGE>
Series 1997-1 Supplement 12
Where:
DRR = Dilution Reserve Ratio II;
c = with respect to Class A Certificates, 2.5, with respect to
Class B Certificates, 2.0 and with respect to the Class C
Certificates, 1.5;
d = the average of the Dilution Ratio during the period of twelve
consecutive Settlement Periods ending prior to such earlier
Settlement Report Date;
e = the product of (i) the twelve-month sample standard deviation
of the Dilution Ratio as of the end of each of the twelve
consecutive Settlement Periods immediately preceding such
earlier Settlement Report Date and (ii) (a) for calculations
with respect to Class A Certificates, 2.58, (b) for calculations
with respect to Class B Certificates, 1.96 or (c) for
calculations with respect to Class C Certificates, 1.96; and
f = the Dilution Period.
"Discount Rate" shall mean, as of any date of determination, the sum
of (a) the weighted average Class A Certificate Rate, Class B Certificate Rate
and Class C Certificate Rate in effect with respect to the outstanding Class A
Certificates, Class B Certificates and Class C Certificates, respectively, as of
the end of the Settlement Period immediately preceding the most recent
Settlement Report Date and (b) an amount equal to (i) the aggregate amount of
fees (other than the Servicing Fee and Program Costs) accrued with respect to
the outstanding Term Certificates during the Settlement Period immediately
preceding the most recent Settlement Report Date divided by (ii) the average
daily Series 1997-1 Invested Amount during such Settlement Period.
<PAGE>
Series 1997-1 Supplement 13
"Early Amortization Event" shall have the meanings assigned in
Section 5.01 of this Supplement and Section 7.01 of the Agreement.
"Early Amortization Period" shall have the meaning assigned in
Section 5.01 of this Supplement and Section 7.01 of the Agreement.
"ERISA Entity" shall mean (i) an "employee benefit plan" within the
meaning of Section 3(3) of ERISA or other retirement arrangement, individual
retirement account or Keogh plan, whether or not it is subject to the provisions
of Title I thereto,(ii)any plan described in Section 4975 (e)(1) of the Code or
(iii) any other entity that would be deemed to be a "benefit plan investor"
within the meaning of Department of Labor Regulation Section 2510.3-101(f)(2).
"Excess" shall have the meaning assigned in subsection 2.06(a).
"Excess Program Costs" shall have the meaning assigned to such term
within the definition of "Program Costs".
"Foreign Investor" means any Term Certificateholder who is not a
"United States person".
"Government Obligor Factor" shall mean 2.5% for the three month
period from December through February of any year and 1.5% for the nine month
period from March through November of any year.
"Ineligibility Event" shall have the meaning set forth in Section
2.06 of the Receivables Sale Agreement.
"Initial Purchaser" shall mean Chase Securities Inc., who is
purchasing the Term Certificates on the Issuance Date pursuant to the Purchase
Agreement.
<PAGE>
Series 1997-1 Supplement 14
"Institutional Accredited Investor" shall mean an institutional
accredited investor, within the meaning of Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act.
"Issuance Date" shall mean February 4, 1997.
"Loss Reserve Ratio I" shall mean, as of any Settlement Report Date
and continuing until (but not including) the next Settlement Report Date, an
amount (expressed as a percentage) that is calculated for the Class A
Certificates, the Class B Certificates or the Class C Certificates, as the case
may be, as follows:
LRR = [(a * b)/c] * d * e
Where:
LRR = Loss Reserve Ratio I;
a = the aggregate Principal Amount of Receivables originated by the
Sellers during the three Settlement Periods immediately preceding
such earlier Settlement Report Date;
b = the highest three-month rolling average of the Aged Receivables
Ratio that occurred during the period of twelve consecutive
Settlement Periods ending prior to such earlier Settlement Report
Date;
c = the Aggregate Receivables Amount as of the last day of the
Settlement Period immediately preceding such earlier Settlement
Report Date;
d = with respect to the Class A Certificates, 2.5, with respect to the
Class B Certificates, 2.0, and with respect to the Class C
Certificates, 1.5; and
e = the Payment Terms Factor.
<PAGE>
Series 1997-1 Supplement 15
"Loss Reserve Ratio II" shall mean, as of any Settlement Report Date
and continuing until (but not including) the next Settlement Report Date, an
amount (expressed as a percentage) that is calculated for the Class A
Certificates, the Class B Certificates or the Class C Certificates, as the case
may be, as follows:
LRR = [(a * b)/c] * d * e + f
Where:
LRR = Loss Reserve Ratio II;
a = the aggregate Principal Amount of Receivables originated by
the Sellers during the three Settlement Periods immediately
preceding such earlier Settlement Report Date;
b = the highest three-month rolling average of the Aged
Receivables Ratio that occurred during the period of twelve
consecutive Settlement Periods preceding such earlier Settlement
Report Date;
c = the Aggregate Receivables Amount as of the last day of the
Settlement Period immediately preceding such earlier Settlement
Report Date;
d = with respect to Class A Certificates, 2.5, with respect to
Class B Certificates, 2.0, and with respect to the Class C
Certificates, 1.5;
e = the Payment Terms Factor; and
f = the product of (i) the twelve-month sample standard deviation
of the Aged Receivables Ratio as of the end of each of the
twelve consecutive Settlement Periods preceding such earlier
Settlement Report Date and (ii) (a) for calculations with
respect to Class A Certificates, 2.58, (b) for calculations with
respect to Class B
<PAGE>
Series 1997-1 Supplement 16
Certificates, 1.96 or (c) for calculations with respect to the Class
C Certificates, 1.96.
"Majority Term Certificateholders" shall mean, on any day, Term
Certificateholders having, in the aggregate, more than 50% of the Series 1997-1
Invested Amount.
"Minimum Ratio" shall mean, as of any Settlement Report Date and
continuing until (but not including) the next Settlement Report Date, an amount
(expressed as a percentage) that is calculated for the Class A Certificates, the
Class B Certificates or the Class C Certificates, as the case may be, as
follows:
MR = (a * b) + c + d
Where:
MR = Minimum Ratio;
a = the average of the Dilution Ratio during the period of the
twelve consecutive Settlement Periods ending prior to such
earlier Settlement Report Date;
b = the Dilution Period;
c = with respect to Class A Certificates, 15.0%, with respect to
Class B Certificates, 12.0%, and with respect to the Class C
Certificates, 9.0%; and
d = the Government Obligor Factor.
"One-Month LIBOR" shall mean for any Accrual Period after the
initial Accrual Period, the rate per annum, as recorded 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
<PAGE>
Series 1997-1 Supplement 17
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 Trustee 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, two Business Days prior to the commencement of such 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 Trustee
in immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Accrual Period.
"Optional Repurchase Percentage" shall mean 10% of the Series 1997-1
Initial Invested Amount at any time on or before the date of determination.
"Optional Termination Date" shall have the meaning assigned in
subsection 2.06(b)(i).
"Optional Termination Notice" shall have the meaning assigned in
subsection 2.06(b)(i).
"Payment Terms Factor" shall mean (a) for the period from the
Issuance Date until the third Settlement Report Date to occur thereafter, 1.14
and (b) for each three-month period to occur after such initial period, a
fraction, the numerator of which is the sum of (i) the weighted average payment
terms (based upon the Principal Amount of the Receivables and expressed as a
number of days) for the Receivables originated during such period and (ii) 60
and the denominator of which is 90; provided, however, that if the Payment Terms
Factor for any period is less than the Payment Terms Factor for the immediately
preceding period, then the actual Payment Terms Factor for
<PAGE>
Series 1997-1 Supplement 18
such current period shall be recalculated to equal a fraction, the numerator of
which is equal to the average of the numerators used to calculate the Payment
Terms Factor for such current period and the three immediately preceding periods
and the denominator of which is 90.
"Program Costs" shall mean, for any Business Day, the sum of (i) the
product of (A) all unpaid fees and expenses due and payable to counsel to, and
independent auditors of, the Company (other than fees and expenses payable on or
in connection with the closing of the issuance of any Term Certificates) on such
Business Day and (B) a fraction, the numerator of which is the Series 1997-1
Invested Amount on such Business Day and the denominator of which is the sum of
(1) the Series 1997-1 Invested Amount on such Business Day and (2) the Aggregate
Commitment Amount with respect to the Series 1997-2 Certificates on such
Business Day, and (ii) all unpaid fees and expenses due and payable to Rating
Agencies rating the Term Certificates; provided, however, that Program Costs
shall not exceed $50,000 in the aggregate in any fiscal year of the Master
Servicer (any amount of the foregoing expenses, indemnities and fees in excess
of $50,000 shall be referred to herein as "Excess Program Costs").
"Purchase Termination Event" shall have the meaning assigned in
Section 7.01 of the Receivables Sale Agreement.
"Purchase Agreement" shall mean each agreement to be entered into on
the Issuance Date between the Company and the Initial Purchaser pursuant to
which the Company agrees to sell, and the Initial Purchaser agrees to purchase,
the principal amount and Class of Term Certificates set forth therein.
"Purchaser Letter" shall mean a Purchaser Letter in substantially
the form attached hereto as Exhibit F.
<PAGE>
Series 1997-1 Supplement 19
"Qualified Institutional Buyer" has the meaning ascribed to such
term in Rule 144A(a) under the Securities Act.
"Rating Agency" shall mean the collective reference to S&P and DCR.
"Record Date" shall mean, with respect to the initial Distribution
Date, the Business Day immediately preceding such Distribution Date and, with
respect to any other Distribution Date, the last Business Day of the immediately
preceding Settlement Period.
"Reduction" shall have the meaning assigned in subsection 2.06(a).
"Reduction Amount" shall have the meaning assigned in subsection
2.06(a).
"Reduction Threshold" shall mean, at any date of determination,
$15,000,000.
"Scheduled Revolving Termination Date" shall mean the last day of
the Settlement Period ending October, 2001.
"Seller Addition Date" shall have the meaning assigned in Section
3.05 of the Receivables Sale Agreement.
"Series 1997-1" shall mean the Series of Investor Certificates and
Subordinated Company Interest, the Principal Terms of which are set forth in
this Supplement.
"Series 1997-1 Accrued Interest Sub-subaccount" shall have the
meaning assigned in subsection 3A.02(a).
"Series 1997-1 Adjusted Invested Amount" shall mean, as of any date
of determination, (i) the Series 1997-1 Invested Amount on such date, minus (ii)
the amount on deposit in the Series 1997-1 Principal Collection Sub-subaccount
on such date.
<PAGE>
Series 1997-1 Supplement 20
"Series 1997-1 Allocable Charged-Off Amount" shall mean, with
respect to any Special Allocation Settlement Report Date, the "Allocable
Charged-Off Amount", if any, that has been allocated to Series 1997-1.
"Series 1997-1 Allocable Recoveries Amount" shall mean, with respect
to any Special Allocation Settlement Report Date, the "Allocable Recoveries
Amount", if any, that has been allocated to Series 1997-1.
"Series 1997-1 Allocated Receivables Amount" shall mean, on any date
of determination, the lower of (i) the Series 1997-1 Target Receivables Amount
on such day and (ii) the Aggregate Receivables Amount on such day times the
percentage equivalent of a fraction the numerator of which is the Series 1997-1
Target Receivables Amount on such day and the denominator of which is the
Aggregate Target Receivables Amount on such day.
"Series 1997-1 Amortization Period" shall mean the period commencing
on the next Business Day following the earliest to occur of (i) the date on
which an Early Amortization Period is declared to commence or automatically
commences, (ii) the Optional Termination Date and (iii) the Scheduled Revolving
Termination Date and ending on the earlier of (i) the date when the Series
1997-1 Invested Amount shall have been reduced to zero and all accrued interest
on the Term Certificates shall have been paid and (ii) the Series 1997-1
Termination Date.
"Series 1997-1 Collections" shall mean, with respect to any Business
Day, an amount equal to the product of (i) the Series 1997-1 Invested Percentage
on such Business Day and (ii) Aggregate Daily Collections.
"Series 1997-1 Collection Subaccount" shall have the meaning
assigned in subsection 3A.02(a).
"Series 1997-1 Daily Interest Expense" shall mean, for any Business
Day during any Accrual Period, the sum of
<PAGE>
Series 1997-1 Supplement 21
(a) in the case of each of the first ten Business Days in the Accrual Period,
one-tenth of the Series 1997-1 Monthly Interest to be distributed on the next
succeeding Distribution Date (up to but not exceeding the full amount thereof),
(b) the aggregate amount of all previously accrued and unpaid Series 1997-1
Daily Interest Expense (up to but not exceeding the full amount thereof) and (c)
the aggregate amount of all accrued and unpaid Class A Additional Interest,
Class B Additional Interest and Class C Additional Interest (up to but not
exceeding the full amount thereof).
"Series 1997-1 Initial Invested Amount" shall mean, collectively,
the Class A Initial Invested Amount, the Class B Initial Invested Amount and the
Class C Initial Invested Amount.
"Series 1997-1 Invested Amount" shall mean, collectively, the Class
A Invested Amount, the Class B Invested Amount and the Class C Invested Amount.
"Series 1997-1 Invested Percentage" shall mean, with respect to any
Business Day (i) during the Series 1997- 1 Revolving Period, the percentage
equivalent of a fraction, the numerator of which is the Series 1997-1 Allocated
Receivables Amount as of the end of the immediately preceding Business Day and
the denominator of which is the greater of (A) the Aggregate Receivables Amount
as of the end of the immediately preceding Business Day and (B) the sum of the
numerators used to calculate the Invested Percentage for all Outstanding Series
on the Business Day for which such percentage is determined and (ii) during the
Series 1997-1 Amortization Period, the percentage equivalent of a fraction, the
numerator of which is the Series 1997-1 Allocated Receivables Amount as of the
end of the last Business Day of the Series 1997-1 Revolving Period (provided
that if during the Series 1997-1 Amortization Period, the Amortization Periods
of all other Outstanding Series which were outstanding prior to the commencement
of the Series 1997-1 Amortization Period commence, then, from and after the date
the last of such Series commences its Amortization
<PAGE>
Series 1997-1 Supplement 22
Period, the numerator shall be the Series 1997-1 Allocated Receivables Amount on
such date) and the denominator of which is the greater of (A) the Aggregate
Receivables Amount as of the end of the immediately preceding Business Day and
(B) the sum of the numerators used to calculate the Invested Percentage for all
Outstanding Series on the Business Day for which such percentage is determined.
"Series 1997-1 Monthly Interest" shall mean, collectively, the Class
A Monthly Interest, the Class B Monthly Interest and the Class C Monthly
Interest.
"Series 1997-1 Monthly Principal Payment" shall have the meaning
assigned in Section 3A.05.
"Series 1997-1 Monthly Servicing Fee" shall have the meaning
assigned in Section 6.01.
"Series 1997-1 Non-Principal Collection Sub-subaccount" shall have
the meaning assigned in subsection 3A.02(a).
"Series 1997-1 Principal Collection Sub-subaccount" shall have the
meaning assigned in subsection 3A.02(a).
"Series 1997-1 Required Subordinated Amount" shall mean, (a) on any
date of determination during the Series 1997-1 Revolving Period, an amount equal
to the sum of:
(i) an amount equal to the greater of (A) the difference between (I)
the product of (x) the Class A Adjusted Invested Amount on such day and
(y) a fraction, the numerator of which is the Class A Ratio and the
denominator of which is one minus the Class A Ratio and (II) the sum of
the Class B Adjusted Invested Amount and the Class C Adjusted Invested
Amount, (B) the difference between (I) the product of (x) the sum of the
Class A Adjusted Invested Amount and the
<PAGE>
Series 1997-1 Supplement 23
Class B Adjusted Invested Amount on such day and (y) a fraction, the
numerator of which is the Class B Ratio and the denominator of which is
one minus the Class B Ratio and (II) the Class C Adjusted Invested Amount
and (C) the product of (I) the Series 1997-1 Adjusted Invested Amount and
(II) a fraction, the numerator of which is the Class C Ratio and the
denominator of which is one minus the Class C Ratio; provided that
whichever method of calculation pursuant to clauses (A), (B) or (C)
results in the greatest amount on any Settlement Report Date shall
continue to be used as the method for the calculations to be made under
this paragraph (i) on each day from and after such Settlement Report Date
until (but not including) the immediately succeeding Settlement Report
Date;
(ii) the product of (A) the Series 1997-1 Invested Amount on such day
and (B) a fraction, the numerator of which is the Carrying Cost Reserve
Ratio and the denominator of which is one minus the Class A Ratio; and
(iii) the product of (A) the Principal Amount of Receivables in the
Trust on such day, (B) a fraction, the numerator of which is the Series
1997-1 Invested Amount and the denominator of which is the Aggregate
Invested Amount on such day and (C) a fraction, the numerator of which is
the Servicing Reserve Ratio and the denominator of which is one minus the
Class A Ratio.
and (b) on any date of determination during the Series 1997-1 Amortization
Period, an amount equal to the Series 1997-1 Required Subordinated Amount on the
last Business Day of the Series 1997-1 Revolving Period; provided that such
amount shall be adjusted on each Special Allocation Settlement Report Date, if
any, as set forth in Section 3A.05(b)(i) and Section 3A.05(c)(iv).
<PAGE>
Series 1997-1 Supplement 24
"Series 1997-1 Revolving Period" shall mean the period commencing on
the Issuance Date and terminating on the earliest to occur of the close of
business on (i) the date on which an Early Amortization Period is declared to
commence or automatically commences, (ii) the Optional Termination Date and
(iii) the Scheduled Revolving Termination Date.
"Series 1997-1 Subordinated Interest" shall have the meaning
specified in subsection 2.02(b).
"Series 1997-1 Target Receivables Amount" shall mean, on any date of
determination, the sum of (i) the Series 1997-1 Adjusted Invested Amount on such
day and (ii) the Series 1997-1 Required Subordinated Amount on such day.
"Series 1997-1 Termination Date" shall mean the Distribution Date
that occurs in August 2002.
"Series 1997-2" shall mean Series 1997-2, the Principal Terms of
which are set forth in the Series 1997-2 Supplement.
"Series 1997-2 Principal Collection Sub-subaccount" shall mean the
Series Principal Collection Sub-subaccount established by the Trustee for the
benefit of the holders of the Series 1997-2 Certificates pursuant to the Series
1997-2 Supplement.
"Series 1997-2 Supplement" shall mean the Series 1997-2 Supplement,
among the Company, the Master Servicer, The Chase Manhattan Bank, as Agent and
the initial purchaser named therein, and the Trustee, relating to the issuance
of Variable Funding Certificates in the form agreed to by the parties thereto,
as amended, supplemented or otherwise modified from time to time.
"Servicing Reserve Ratio" shall mean, as of any Settlement Report
Date and continuing (but not including)
<PAGE>
Series 1997-1 Supplement 25
until the next Settlement Report Date, an amount (expressed as a percentage)
equal to (i) the product of (A) the Servicing Fee Percentage and (B) 2.0 times
Days Sales Outstanding as of such earlier Settlement Report Date
divided by (ii) 360.
"Special Distribution Date" shall have the meaning
assigned in subsection 2.06(a).
"Subsequent Issuance Date" shall mean each Distribution Date, if
any, on which the Trustee issues additional Class A Certificates, Class B
Certificates and Class C Certificates pursuant to Section 2.07.
"Term Certificateholders" shall mean, collectively, the Class A
Certificateholders, the Class B Certificateholders and the Class C
Certificateholders.
"Term Certificateholders' Interest" shall have the meaning assigned
in subsection 2.02(a).
"Term Certificates" shall mean, collectively, those Investor
Certificates designated as the Class A Certificates, the Class B Certificates
and the Class C Certificates.
"Trust Accounts" shall have the meaning assigned in subsection
3A.02(a).
"United States person" means an individual who is a citizen or
resident of the United States, or a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, or an estate or trust the income of which is subject to
U.S. federal income taxation regardless of its source.
(b) If any term, definition or provision contained herein conflicts
with or is inconsistent with any term, definition or provision contained in the
Agreement,
<PAGE>
Series 1997-1 Supplement 26
the terms and provisions of this Supplement shall govern. All capitalized terms
not otherwise defined herein are defined in the Agreement. All Article, Section,
subsection, Exhibit and Schedule references herein shall mean Article, Section
or subsection of or Exhibit or Schedule to this Supplement, except as otherwise
provided herein. Unless otherwise stated herein, as the context otherwise
requires or if such term is otherwise defined in the Agreement, each capitalized
term used or defined herein shall relate only to the Term Certificates and the
Series 1997-1 Subordinated Interest and to no other Series of Investor
Certificates or Subordinated Company Interest issued by the Trust.
(c) Any reference herein to a Schedule or Exhibit to this Supplement
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.
(d) Any reference in this Supplement 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
Supplement, and no such reference shall be interpreted as a reference to any
implicit, inferred, tacit or otherwise unexpressed representation, warranty or
covenant.
(e) The words "include", "includes" or "including" shall be
interpreted as if followed, in each case, by the phrase "without limitation".
<PAGE>
Series 1997-1 Supplement 27
ARTICLE II
Designation of Term Certificates; Purchase and Sale
of the Term Certificates
SECTION 2.01. Designation. The Investor Certificates created and
authorized pursuant to the Agreement and this Supplement shall be divided into
three classes, which shall be designated respectively as (a) the "Class A
Certificates, Series 1997-1", (b) the "Class B Certificates, Series 1997-1" and
(c) the "Class C Certificates, Series 1997-1".
SECTION 2.02. The Term Certificates and Series 1997-1 Subordinated
Interest. (a) The Term Certificates shall represent fractional undivided
interests in the Trust Assets, consisting of the right of the Term
Certificateholders to receive the distributions specified herein out of (i) the
Series 1997-1 Invested Percentage (expressed as a decimal) of Collections
received with respect to the Receivables and of all other funds on deposit in
the Collection Account and (ii) to the extent such interests appear herein, all
other funds on deposit in the Series 1997-1 Collection Subaccount and any
subaccounts thereof (collectively, the "Term Certificateholders' Interest").
(b) The Company shall retain a fractional undivided interest in the
Trust Assets, consisting of the right to receive the distributions specified
herein out of (i) the Series 1997-1 Invested Percentage (expressed as a decimal)
of Collections received with respect to the Receivables and all other funds on
deposit in the Collection Account and (ii) to the extent such interests appear
herein, all other funds on deposit in the Series 1997-1 Collection Subaccount
and any subaccounts thereof, in each case to the extent not required to be
distributed to or for the benefit of the Term Certificateholders (the "Series
1997-1 Subordinated Interest"). The Exchangeable Company Interest and any other
Series of Investor Certificates or
<PAGE>
Series 1997-1 Supplement 28
Subordinated Company Interest outstanding shall represent the fractional
undivided interests in the remainder of the Trust Assets not allocated pursuant
hereto to the Term 1997-1 Certificateholders' Interest or the Series 1997-1
Subordinated Interest.
(c) The Class A Certificates, the Class B Certificates and the Class
C Certificates shall be issued in registered form in substantially the form of
Exhibits A, B and C, respectively, and shall, upon issue, be executed and
delivered by the Company to the Trustee for authentication and redelivery as
provided in Section 2.03 hereof and Section 5.02 of the Agreement.
SECTION 2.03. Delivery. (a) On the Issuance Date, the Company shall
sign on behalf of the Trust and shall direct the Trustee in writing pursuant to
Section 5.02 of the Agreement to duly authenticate, and the Trustee, upon
receiving such direction, shall so authenticate (i) subject to the provisions
set forth in subsection (b) below, the Class A Certificates in such names and
such denominations in accordance with such directions of the Company, (ii)
subject to the provisions set forth in subsection (b) below, the Class B
Certificates in such names and such denominations in accordance with such
directions of the Company and (iii) the Class C Certificates in such names and
such denominations in accordance with such directions of the Company. Term
Certificates shall be issued in minimum denominations of $1,000,000 and in
integral multiples of $100,000 in excess thereof.
(b) Except with respect to any Class A Certificates or Class B
Certificates purchased on the Issuance Date by an entity described in
2.04(a)(ii), which will be issued in the form of Definitive Certificates, the
Class A Certificates and the Class B Certificates shall be initially issued in
the form of one or more global certificates, representing the Book-Entry
Certificate, to be delivered to the Depository. Except as provided in Section
5.13 of the Agreement or Section 2.04 of this
<PAGE>
Series 1997-1 Supplement 29
Supplement, such Book-Entry Certificates shall at all times remain registered in
the name of the Depository or its nominee and at all times: (i) registration of
such Book-Entry Certificates may not be transferred by the Trustee except to a
successor to the Depository; (ii) ownership and transfers of registration of
such Book-Entry Certificates on the books of the Depository shall be governed by
applicable rules established by the Depository and by Section 2.04; (iii) the
Depository may collect its usual and customary fees, charges and expenses from
its Depository Participants; (iv) the Trustee shall deal with the Depository,
Depository Participants and indirect participating firms as representatives of
such Certificate Book-Entry Holders of such Book-Entry Certificates for purposes
of exercising the rights of such Book-Entry Certificateholders under the
Agreement and this Supplement, and requests and directions for and votes of such
representatives shall not be deemed to be inconsistent if they are made with
respect to different Certificate Book-Entry Holders; and (v) the Trustee may
rely and shall be fully protected in relying upon information furnished by the
Depository with respect to its Depository Participants and furnished by the
Depository Participants with respect to indirect participating firms and Persons
shown on the books of such indirect participating firms as direct or indirect
Certificate Book-Entry Holders.
All transfers by Certificate Book-Entry Holders of Class A
Certificates and Class B Certificates shall be made in accordance with the
procedures established by the Depository Participant or brokerage firm
representing such Book-Entry Certificate- holders and the Trustee shall have no
responsibility with respect to any such transfers. Each Depository Participant
shall only transfer Class A Certificates and Class B Certificates of Certificate
Book-Entry Holders it represents or of brokerage firms for which it acts as
agent in accordance with the Depository's normal procedures and in accordance
with applicable law.
(c) The Class C Certificates shall be issued only
as Definitive Certificates.
<PAGE>
Series 1997-1 Supplement 30
SECTION 2.04. Restrictions on Transfer. (a) On the Issuance Date,
the Company shall sell the Term Certificates to the Initial Purchaser pursuant
to the Purchase Agreement and deliver the Term Certificates in the form
specified therein. Thereafter, the Term Certificates may not be transferred
except as follows:
(i) with respect to Term Certificates evidenced by Book-Entry
Certificates, to Qualified Institutional Buyers in reliance on the
exemption from the registration requirements of the Securities Act
provided by Rule 144A promulgated thereunder ("Rule 144A"); and
(ii) with respect to Term Certificates evidenced by Definitive
Certificates, (A) to Qualified Institutional Buyers in reliance on the
exemption from the registration requirements of the Securities Act
provided by Rule 144A thereunder, (B) to other Institutional Accredited
Investors who take delivery of such Term Certificates in definitive form
and who deliver a Purchaser Letter to the Trustee in the form attached
hereto as Exhibit F or (C) to a person who takes delivery of such Term
Certificate in definitive form pursuant to a transaction that is otherwise
exempt from the registration requirements of the Securities Act, as
confirmed in an opinion of counsel addressed to the Trustee and the
Company, which counsel and opinion are satisfactory to the Trustee and the
Company.
The Trustee shall have no obligations or duties with respect to determining
whether any transfers of the Term Certificates are made in accordance with the
Securities Act or any other Requirements of Law; provided that with respect to
Definitive Certificates, the Trustee shall enforce such transfer restrictions in
accordance with the terms set forth on the related Term Certificate and the
provisions of the Agreement and this Supplement.
<PAGE>
Series 1997-1 Supplement 31
(b) Each purchaser (other than the Initial Purchaser) of the Term
Certificates (including, without limitation, any purchaser of an interest in the
Book-Entry Certificates) will be deemed to have represented and agreed as
follows:
(i) it is (A) a Qualified Institutional Buyer as defined in Rule
144A(a) and is acquiring the Term Certificates for its own institutional
account or for the account or accounts of a Qualified Institutional Buyer
or (B) purchasing Term Certificates being delivered in the form of
Definitive Certificates in a transaction exempt from registration under
the Securities Act and in compliance with the provisions of the Agreement
and in compliance with the legends set forth in clause (vi) below;
(ii) it is purchasing one or more Term Certificates in an amount of
at least $1,000,000 and it understands that such Term Certificate may be
resold, pledged or otherwise transferred only in an amount of at least
$1,000,000;
(iii) (A) it is not an ERISA Entity and (B) it is not acquiring or
holding any Term Certificate, directly or indirectly, for or on behalf of
an ERISA Entity;
(iv) if it is acquiring Class C Certificates, (A) it is not, for
U.S. Federal income tax purposes, a partnership, trust, estate or "S
corporation" (as defined in the Code) or (B) it is, for U.S. Federal
income tax purposes, a partnership, trust, estate or "S Corporation" (as
defined in the Code), but after giving effect to such purchase of such
Class C Certificates by such purchaser, less than 50 percent of the
aggregate value of such purchaser's assets would consist of Class C
Certificates;
(v) it understands that the Term Certificates are being transferred
to it in a transaction not involving
<PAGE>
Series 1997-1 Supplement 32
any public offering within the meaning of the Securities Act, and that, if
in the future it decides to resell, pledge or otherwise transfer any Term
Certificates, such Term Certificates may be resold, pledged or transferred
only (A) in a transaction meeting the requirements of Rule 144A to a
person who the seller reasonably believes is a Qualified Institutional
Buyer that purchases for its own account or for the account or accounts of
a Qualified Institutional Buyer to whom notice is given that the resale,
pledge or transfer is being made in reliance on Rule 144A or (B) to
purchasers of Term Certificates being delivered in the form of Definitive
Certificates, pursuant to a transaction otherwise exempt from registration
under the Securities Act and in compliance with the provisions of the
Agreement and in compliance with the legends set forth in clause (vi)
below;
(vi) it understands that each Term Certificate will bear a legend
substantially to the following effect:
[For Book-Entry Certificates only: "UNLESS THIS TERM CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY TERM
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE
& CO., HAS AN INTEREST HEREIN.
<PAGE>
Series 1997-1 Supplement 33
INTERESTS IN THIS TERM CERTIFICATE MAY ONLY BE HELD BY QUALIFIED
INSTITUTIONAL BUYERS (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT OF 1933).]
THIS TERM CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "ACT"). THE HOLDER HEREOF, BY PURCHASING THIS TERM
CERTIFICATE, AGREES THAT SUCH TERM CERTIFICATE MAY BE RESOLD,
PLEDGED OR TRANSFERRED ONLY IN ACCORDANCE WITH ANY APPLICABLE STATE
SECURITIES LAWS IN AN AMOUNT OF AT LEAST $1,000,000 AND (1) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE ACT
("RULE 144A"), TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER THAT PURCHASES FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OR ACCOUNTS OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A OR (2) TO A PERSON (A) WHO IS AN
"INSTITUTIONAL ACCREDITED INVESTOR", WITHIN THE MEANING OF RULE
501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE ACT, AND WHO
DELIVERS A PURCHASER LETTER TO THE TRUSTEE IN THE FORM ATTACHED TO
THE SERIES 1997-1 SUPPLEMENT OR (B) WHO IS TAKING DELIVERY OF SUCH
TERM CERTIFICATE PURSUANT TO A TRANSACTION THAT IS OTHERWISE EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE ACT, AS CONFIRMED IN AN
OPINION OF COUNSEL ADDRESSED TO THE TRUSTEE AND THE COMPANY, WHICH
COUNSEL AND OPINION ARE SATISFACTORY TO THE COMPANY AND THE TRUSTEE.
THIS TERM CERTIFICATE MAY NOT BE ACQUIRED OR HELD BY OR ON BEHALF OF
(1) AN "EMPLOYEE BENEFIT PLAN" WITHIN THE MEANING OF SECTION 3(3) OF
THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR
OTHER RETIREMENT ARRANGEMENT, INDIVIDUAL RETIREMENT ACCOUNT OR KEOGH
PLAN, WHETHER OR NOT IT IS SUBJECT TO THE PROVISIONS OF TITLE I
THERETO, (2) ANY PLAN DESCRIBED IN SECTION
<PAGE>
Series 1997-1 Supplement 34
4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE") OR (3) ANY OTHER ENTITY THAT WOULD BE DEEMED TO BE A
"BENEFIT PLAN INVESTOR" WITHIN THE MEANING OF DEPARTMENT OF LABOR
REGULATION SECTION 2510.3-101(f)(2) (ANY OF THE FOREGOING, AN "ERISA
ENTITY").
THIS TERM CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY
GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY OTHER PERSON.
[For Class B Certificates only: THE CLASS B CERTIFICATES ARE
SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A CERTIFICATES AS
PROVIDED IN THE POOLING AGREEMENT AND THE SERIES 1997-1 SUPPLEMENT.]
[For Class C Certificates only: THE CLASS C CERTIFICATES MAY NOT BE
SOLD, ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS THE
TRANSFEREE THEREOF DELIVERS A LETTER, IN THE FORM ATTACHED TO THE
SERIES 1997-1 SUPPLEMENT, TO THE EFFECT THAT (I) SUCH TRANSFEREE IS
ACQUIRING SUCH CLASS C CERTIFICATES FOR ITS OWN ACCOUNT, IS THE SOLE
BENEFICIAL OWNER OF SUCH CLASS C CERTIFICATES AND WILL REMAIN THE
SOLE BENEFICIAL OWNER OF SUCH CLASS C CERTIFICATES UNTIL SUCH CLASS
C CERTIFICATES ARE TRANSFERRED AS PROVIDED IN THE SERIES 1997-1
SUPPLEMENT, (II)(A) SUCH TRANSFEREE IS NOT, FOR U.S. FEDERAL INCOME
TAX PURPOSES, A TRUST, ESTATE, PARTNERSHIP OR "S CORPORATION" (AS
DEFINED IN SECTION 1361(a)(1) OF THE CODE or (B) SUCH TRANSFEREE IS
A TRUST, ESTATE, PARTNERSHIP OR "S CORPORATION" (AS DEFINED IN
SECTION 1361(a)(1) OF THE CODE) FOR U.S. FEDERAL INCOME TAX
PURPOSES, BUT AFTER GIVING EFFECT TO SUCH TRANSFER OF CLASS C
CERTIFICATES TO SUCH TRANSFEREE, LESS THAN 50 PERCENT OF THE
AGGREGATE VALUE OF SUCH TRANSFEREE'S ASSETS WOULD CONSIST OF CLASS C
CERTIFICATES AND (III) SUCH CLASS C
<PAGE>
Series 1997-1 Supplement 35
CERTIFICATES HAVE NOT BEEN TRANSFERRED THROUGH AN "ESTABLISHED
SECURITIES MARKET" WITHIN THE MEANING OF SECTION 7704(b) OF THE
CODE.
THE CLASS C CERTIFICATES ARE SUBORDINATED IN RIGHT OF PAYMENT TO THE
CLASS A CERTIFICATES AND THE CLASS B CERTIFICATES AS PROVIDED IN THE
POOLING AGREEMENT AND THE SERIES 1997-1 SUPPLEMENT.
THE TRUSTEE WILL WITHHOLD PURSUANT TO SECTION 1446 OF THE CODE ON
PAYMENTS OF INTEREST ALLOCABLE TO CLASS C CERTIFICATEHOLDERS WHO ARE
FOREIGN INVESTORS UNLESS SUCH CLASS C CERTIFICATEHOLDERS PROVIDE THE
TRUSTEE WITH (I) A PROPERLY EXECUTED IRS FORM 4224 (OR SUCCESSOR
FORM) AND (II) UPON REQUEST BY THE TRUSTEE AND IN A FORM ACCEPTABLE
TO THE TRUSTEE, EVIDENCE DOCUMENTING THE INCLUSION IN GROSS INCOME
OF, AND THE PAYMENT OF APPROPRIATE U.S. TAXES, IF ANY, ON, THAT
PORTION OF THE TRUST'S NET INCOME ALLOCABLE TO SUCH CLASS C
CERTIFICATEHOLDERS. IF THE TRUSTEE DOES WITHHOLD ON A FOREIGN
INVESTOR PURSUANT TO SECTION 1446 OF THE CODE, THE CASH RECEIVED ON
A CURRENT BASIS BY FOREIGN INVESTORS WHO OWN CLASS C CERTIFICATES
WILL BE LESS THAN THE FULL INTEREST PAYMENTS. FOR THESE PURPOSES, A
FOREIGN INVESTOR IS A PERSON OR ENTITY OTHER THAN AN INDIVIDUAL WHO
IS A CITIZEN OR RESIDENT OF THE UNITED STATES, A CORPORATION,
PARTNERSHIP OR OTHER ENTITY CREATED OR ORGANIZED IN OR UNDER THE
LAWS OF THE UNITED STATES OR ANY POLITICAL SUBDIVISION THEREOF (A
"U.S. COMPANY"), OR AN ESTATE OR TRUST THE INCOME OF WHICH IS
SUBJECT TO U.S. FEDERAL INCOME TAXATION REGARDLESS OF ITS SOURCE. A
U.S. COMPANY WHICH IS A SUBSIDIARY OF A FOREIGN INVESTOR IS NOT
ITSELF CONSIDERED A FOREIGN INVESTOR BUT A U.S. BRANCH OF A FOREIGN
INVESTOR WOULD BE CONSIDERED A FOREIGN INVESTOR.]
<PAGE>
Series 1997-1 Supplement 36
(c) The Transfer Agent and Registrar shall not permit the transfer
of any Term Certificates unless such transfer complies with the terms of the
foregoing legends and, in the case of a transfer (i) to an Institutional
Accredited Investor (other than a Qualified Institutional Buyer), the transferee
delivers a completed Purchaser Letter in the form attached to this supplement as
Exhibit F or (ii) to a person other than a Qualified Institutional Buyer or an
Institutional Accredited Investor, upon delivery of an opinion of counsel
selected by the Company, satisfactory to the Trustee and the Company, to the
effect that the transferee is taking delivery of the Term Certificates in a
transaction that is otherwise exempt from the registration requirements of the
Securities Act.
(d) In addition, the Class C Certificates may not be sold, assigned,
pledged or otherwise transferred (except by the Initial Purchaser) unless the
transferee thereof delivers a letter, in the form attached to this Supplement as
Exhibit G, to the effect that (i) such transferee is acquiring such Class C
Certificates for its own account, is the sole beneficial owner of such Class C
Certificates and will remain the sole beneficial owner of such Class C
Certificates until such Class C Certificates are transferred as provided in this
Supplement, (ii)(A) such transferee is not, for U.S. Federal income tax
purposes, a Trust, Estate, Partnership or "S Corporation" (as defined in Section
1361(a)(1) of the Code) or (B) such transferee is a Trust, Estate, Partnership
or "S Corporation" (as defined in section 1361(a)(1) of the Code) for U.S.
Federal income tax purposes, but after giving effect to such transfer of Class C
Certificates to such Transferee, less than 50 percent of the aggregate value of
such Transferee's assets would consist of Class C Certificates and (iii) such
Class C Certificates have not been transferred through an "established
securities market" within the meaning of Section 7704(b) of the Code.
SECTION 2.05. Application of Proceeds. On the Issuance Date, the
Trustee shall remit to the Company the
<PAGE>
Series 1997-1 Supplement 37
cash proceeds received by it upon the issuance of the Term Certificates.
SECTION 2.06. Procedure for Decreasing the Invested Amount; Optional
Termination. (a) If, as of the last day of any period of three consecutive
Settlement Periods, the daily average excess during such period of the Series
1997-1 Invested Amount over the Series 1997-1 Adjusted Invested Amount (the
"Excess") equals or exceeds the Reduction Threshold, as of the last day of any
Settlement Period, the Company shall reduce the Class A Invested Amount, the
Class B Invested Amount and the Class C Invested Amount (a "Reduction"), by
causing the Trustee to distribute to the Term Certificateholders an amount (the
"Reduction Amount") equal to the Excess in accordance with subsection 3A.06(d).
The Company shall direct the Trustee in writing to make such distribution and
shall specify the Reduction Amount to be distributed as specified below. The
distribution of the Reduction Amount shall be made to the Term
Certificateholders pro rata based on the initial invested amount of each Class,
from funds on deposit in the Series 1997-1 Principal Collection Sub-subaccount
on the immediately succeeding Distribution Date (a "Special Distribution Date");
provided that no Early Amortization Event or Potential Early Amortization Event
has occurred and is continuing and the Master Servicer on behalf of the Company
shall have given the Trustee written notice of such Reduction and the related
Reduction Amount at least five days prior to the related Special Distribution
Date setting forth the Reduction Amount and, in the case of such notice to the
Trustee, instructions to not distribute to the Company any amounts pursuant to
subsection 3A.03(c)(i) until the condition set forth in the second proviso in
such subsection is satisfied. The Trustee shall provide written notice of any
proposed Reduction to the Term Certificateholders and each Rating Agency as
promptly as is reasonably practicable.
(b) (i) On any Business Day to occur following the second
anniversary of the Issuance Date and prior to the
<PAGE>
Series 1997-1 Supplement 38
occurrence of the Scheduled Revolving Termination Date, an Early Amortization
Event which has not been cured or waived or a Potential Early Amortization Event
which has not been cured or waived, the Company shall have the right to deliver
an irrevocable notice (an "Optional Termination Notice") to the Trustee and the
Master Servicer in which the Company declares that the Series 1997-1 Revolving
Period shall terminate on the date (the "Optional Termination Date") set forth
in such notice (which date, in any event, shall not be less than 10 days from
the date on which such notice is delivered).
(ii) From and after the Optional Termination Date, the Series 1997-1
Amortization Period shall commence for all purposes under this Supplement and
the other Transaction Documents. The Trustee shall give prompt written notice of
its receipt of an Optional Termination Notice to the Term Certificateholders and
each Rating Agency.
SECTION 2.07. Sale of Additional Term Certificates. (a) The Company
may, upon written notice to the Trustee, the Master Servicer and the Term
Certificateholders and upon satisfaction of each of the conditions set forth in
subsection (b) of this Section 2.07, direct the Trustee in writing to issue on
the following Distribution Date (each such date a "Subsequent Issuance Date")
additional Class A Certificates, Class B Certificates and Class C Certificates,
identical in all respects to the existing Class A Certificates, Class B
Certificates and Class C Certificates, in an aggregate principal amount
specified by the Company (pro rata based on the initial invested amount of each
Class) (except that the Certificate Rate applicable to such additional Class A
Certificates, Class B Certificates and Class C Certificates may differ from the
Certificate Rate applicable to existing Class A Certificates, Class B
Certificates and Class C Certificates); provided that the Series 1997-1 Target
Receivables Amount does not exceed the Series 1997-1 Allocated Receivables
Amount, after giving effect to any
<PAGE>
Series 1997-1 Supplement 39
increase in the Invested Amount on such Subsequent Issuance Date.
The Company may arrange for the sale of such additional Class A
Certificates, Class B Certificates and Class C Certificates pursuant to a
private placement or any other sale arrangement; provided that the Company
agrees that it shall first offer to the existing Term Certificateholders the
opportunity to purchase such additional Class A Certificates, Class B
Certificates and Class C Certificates on substantially the same terms and
conditions that such additional Class A Certificates, Class B Certificates and
Class C Certificates are to be offered to other purchasers. If existing Class A
Certificateholders, Class B Certificateholders or Class C Certificateholders, as
the case may be, elect not to purchase all such additional Class A Certificates,
Class B Certificates or Class C Certificates within 10 Business Days following
their receipt of an offer therefor, the Company may proceed with its
arrangements to sell all such additional Class A Certificates, Class B
Certificates and Class C Certificates to any other eligible purchasers. In the
event that the existing Class A Certificateholders, Class B Certificateholders
or Class C Certificateholders, as the case may be, subscribe to purchase more
additional Class A Certificates, Class B Certificates or Class C Certificates
than are being offered by the Company at such time, then each such existing
Class A Certificateholder, Class B Certificateholder or Class C
Certificateholder shall be entitled to purchase a pro rata portion of such
additional Class A Certificates, Class B Certificates or Class C Certificates
based on the aggregate principal amount of Class A Certificates, Class B
Certificates or Class C Certificates then held by such holder. On each
Subsequent Issuance Date, if any, the Series 1997-1 Invested Amount (and each
other amount set forth herein, the calculation of which is based on such amount)
shall be recalculated by the Company to include the additional initial invested
amounts with respect to the Class A Certificates, Class B Certificates and Class
C Certificates issued on such date.
<PAGE>
Series 1997-1 Supplement 40
(b) On the Subsequent Issuance Date, the Trustee shall only
authenticate and deliver any additional Class A Certificates, Class B
Certificates and Class C Certificates upon satisfaction of the following on or
prior to such Subsequent Issuance Date:
(i) the Rating Agencies shall have been notified by the
Company of the proposed issuance of additional Class A Certificates, Class
B Certificates and Class C Certificates at least 10 days prior to the
proposed Subsequent Issuance Date, each Rating Agency shall have issued a
rating (as confirmed in a letter delivered to the Trustee) on the
additional Class A Certificates, Class B Certificates and Class C
Certificates that is equivalent to the rating issued by such Rating Agency
on the Issuance Date and the Rating Agency Condition shall have been
satisfied on or prior to such Subsequent Issuance Date;
(ii) the Trustee shall have received an Officer's Certificate
certifying that no Early Amortization Event or Potential Early
Amortization Event shall have occurred and be continuing with respect to
Series 1997-1 or would occur as a result of such issuance upon which the
Trustee may conclusively rely;
(iii) a Tax Opinion (including the opinion set forth in clause
(a)(ii) of the definition thereof) addressed to the Trust and the Trustee
shall have been delivered to the Trustee (the costs and expenses
associated with such opinion shall constitute Program Costs); and
(iv) an Opinion of Counsel addressed to the Trust and the
Trustee shall have been delivered to the Trustee stating that all of the
conditions to the issuance of such additional Class A Certificates, Class
B Certificates and Class C Certificates shall have been
<PAGE>
Series 1997-1 Supplement 41
satisfied (the costs and expenses associated with such opinion shall
constitute Program Costs).
(c) On each Subsequent Issuance Date, the Company in a written order
shall direct the Trustee to authenticate and deliver additional Class A
Certificates, Class B Certificates and Class C Certificates in accordance with
Section 2.03.
ARTICLE III
Article III of the Agreement
Section 3.01 of the Agreement and each other section of Article III
of the Agreement relating to another Series shall be read in its entirety as
provided in the Agreement. Article III of the Agreement (except for Section 3.01
thereof and any portion thereof relating to another Series) shall read in its
entirety as follows and shall be exclusively applicable to the Term Certificates
and the Series 1997-1 Subordinated Interest:
SECTION 3A.02. Establishment of Trust Accounts. (a) The Trustee
shall cause to be established and maintained in the name of the Trustee, on
behalf of the Trust, (i) for the benefit of the Class A Certificateholders, (ii)
for the benefit, subject to the prior and senior interest of the Class A
Certificateholders, of the Class B Certificateholders, (iii) for the benefit,
subject to the prior and senior interests of the Class A Certificateholders and
the Class B Certificateholders, of the Class C Certificateholders and (iv) in
the case of clauses (A) and (B) below, for the benefit, subject to the prior and
senior interests of the Term Certificateholders, of the holder of the Series
1997-1 Subordinated Interest, (A) a subaccount of the Collection Account (the
"Series 1997-1 Collection Subaccount"), which subaccount is the Series
Collection Subaccount with respect to Series 1997-1; (B) two subaccounts of the
Series 1997-1 Collection
<PAGE>
Series 1997-1 Supplement 42
Subaccount: (1) the Series 1997-1 Principal Collection Sub-subaccount and (2)
the Series 1997-1 Non-Principal Collection Sub-subaccount (respectively, the
"Series 1997-1 Principal Collection Sub-subaccount" and the "Series 1997-1
Non-Principal Collection Sub-subaccount"); and (C) a subaccount of the Series
1997-1 Non-Principal Collection Sub-subaccount (the "Series 1997-1 Accrued
Interest Sub-subaccount"; all accounts established pursuant to this subsection
3A.02(a) and listed on Schedule 1, collectively, the "Trust Accounts"), each
Trust Account to bear a designation indicating that the funds deposited therein
are held for the benefit of the Persons (and, for each such Person, to the
extent) set forth in clauses (i), (ii), (iii) and (iv) above. The Trustee, on
behalf of the Holders, shall possess all right, title and interest in all funds
from time to time on deposit in, and all Eligible Investments credited to, the
Trust Accounts and in all proceeds thereof. The Trust Accounts shall be under
the sole dominion and control of the Trustee for the exclusive benefit of the
Persons (and, for each such Person to the extent) set forth in clauses (i),
(ii), (iii) and (iv) above. In any case where the Company has not provided
applicable written direction as to Eligible Investments to the Trustee, the
Trustee shall invest in demand deposits or money market funds that constitute
Eligible Investments.
(b) All Eligible Investments in the Trust Accounts shall be held by
the Trustee, on behalf of the Holders, for the benefit of the Persons (and, for
each such Person, to the extent) set forth in clauses (i), (ii), (iii) and (iv)
of subsection (a) above. Funds on deposit in a Trust Account that is a
Sub-subaccount of the Collection Account shall, at the direction of the Company,
be invested together with funds held in other Sub-subaccounts of the Collection
Account. After giving effect to any distribution to the Company pursuant to
subsection 3A.03(c), amounts on deposit and available for investment in the
Series 1997-1 Principal Collection Sub-subaccount shall be invested by the
Trustee, at the written direction of the Company, in Eligible Investments that
mature, or that are payable or
<PAGE>
Series 1997-1 Supplement 43
redeemable upon demand of the holder thereof, (i) in the case of any such
investment made during the Series 1997-1 Revolving Period, on or prior to the
next Business Day and (ii) in the case of any such investment made during the
Series 1997-1 Amortization Period, on or prior to the Business Day immediately
preceding the next Distribution Date. Amounts on deposit and available for
investment in the Series 1997-1 Non-Principal Collection Sub-subaccount and the
Series 1995-1 Accrued Interest Sub-subaccount shall be invested by the Trustee
at the written direction of the Company in Eligible Investments that mature, or
that are payable or redeemable upon demand of the holder thereof, on or prior to
the Business Day immediately preceding the subsequent Distribution Date. As of
the Business Day immediately preceding the Settlement Report Date, all interest
and other investment earnings (net of losses and investment expenses) on funds
deposited in the Series 1997-1 Accrued Interest Sub-subaccount shall be
deposited in the Series 1997-1 Non-Principal Collection Sub-subaccount and all
interest and investment earnings (net of losses and investment expenses) on
funds deposited in the Series 1997-1 Principal Collection Sub-subaccount shall
be deposited in the Series 1997-1 Non-Principal Collection Sub-subaccount.
SECTION 3A.03. Daily Allocations. (a) The portion of Aggregate Daily
Collections allocated to the Term Certificates and the Series 1997-1
Subordinated Interest pursuant to Article III of the Agreement shall be
allocated and distributed as set forth in this Article III by the Trustee based
solely on the information provided it by the Master Servicer in the Daily Report
(upon which the Trustee may conclusively rely, subject to its obligation to
perform the procedures set forth in the Internal Operating Procedures
Memorandum).
(b)(i) On each Business Day, an amount equal to the Accrued Expense
Amount for such day (or, during the Series 1997-1 Revolving Period, such
greater amount as the Company may request in writing) shall be transferred
by the Trustee from the Series 1997-1
<PAGE>
Series 1997-1 Supplement 44
Collection Subaccount to the Series 1997-1 Non-Principal Collection
Sub-subaccount; provided, that (A) on the tenth Business Day of each
Accrual Period (and each Business Day thereafter, if necessary, until the
full amount of any positive Accrued Expense Adjustment is transferred),
(B) on the day of any Reduction and (C) on the last Business Day of each
Accrual Period, an amount equal to the Accrued Expense Adjustment shall,
if such adjustment is a positive amount, be transferred from the Series
1997-1 Collection Subaccount to the Series 1997-1 Non-Principal Collection
Sub-subaccount or, if such adjustment is a negative amount, be transferred
from the Series 1997-1 Non-Principal Collection Sub-subaccount to the
Series 1997-1 Collection Subaccount (or deducted from the transfer in
respect of the Accrued Expense Amount for such day); and
(ii) on each Business Day (including Distribution Dates), following
the transfers pursuant to clause (i) above, any remaining funds on deposit
in the Series 1997-1 Collection Subaccount shall be transferred by the
Trustee to the Series 1997-1 Principal Collection Sub-subaccount.
(c)(i) On each Business Day during the Series 1997-1 Revolving
Period (including Distribution Dates), after giving effect to all
allocations of Aggregate Daily Collections referred to in subparagraphs
(b)(i) and (b)(ii) on such Business Day, amounts on deposit in the Series
1997-1 Principal Collection Sub-subaccount shall be distributed or
transferred by the Trustee, based solely on the information provided to
the Trustee by the Master Servicer in the Daily Report (upon which the
Trustee may conclusively rely, subject to its obligation to perform the
procedures set forth in the Internal Operating Procedures Memorandum), (A)
first, to pay Excess Program Costs and (B) second, (I) to the Company as
the holder of the Series 1997-1 Subordinated Interest in accordance with
the directions contained in
<PAGE>
Series 1997-1 Supplement 45
the Daily Report, (II) at the election of the Company as the holder of the
Series 1997-1 Subordinated Interest, by written notice to the Master
Servicer and the Trustee, to such accounts or to such Persons as the
Company may direct in writing (which directions may consist of standing
instructions provided by the Company that shall remain in effect until
changed by the Company in writing) or (III) at the election of the Company
as the holder of the Series 1997-1 Subordinated Interest, by written
notice to the Master Servicer and the Trustee, to the Series 1997-2
Principal Collection Sub-subaccount; provided that such distributions or
transfers, as the case may be, shall be made only if no Early Amortization
Event or Potential Early Amortization Event relating to an Early
Amortization Event set forth in subsections (a), (d) (but only with
respect to a Servicer Default set forth in subsection 6.01(e) of the
Servicing Agreement relating to the Master Servicer or to one or more
Servicers that are responsible for servicing Receivables representing 15%
or more of the Aggregate Receivables Amount) or (e), (j) or (k) of Section
5.01 of this Supplement has occurred and is continuing and only to the
extent that, if, after giving effect to such distributions or transfers,
the Series 1997-1 Target Receivables Amount would not exceed the Series
1997-1 Allocated Receivables Amount; provided further that if the Company
or the Master Servicer, on behalf of the Company, shall have given a
notice of a Reduction and the related Reduction Amount to the Trustee and
the Master Servicer pursuant to subsection 2.06(a) and the Trustee shall
have received such notice, the Trustee shall retain, until the related
Special Distribution Date, aggregate amounts on deposit in the Series
1997-1 Principal Collection Sub-subaccount equal to the sum of the
Reduction Amount in respect thereof. Amounts distributed to the Company
hereunder shall be deemed to be paid first from Collections received
directly by the Master Servicer and second from Collections received in
the Lockboxes.
<PAGE>
Series 1997-1 Supplement 46
(ii) During the Series 1997-1 Amortization Period, amounts on
deposit in the Series 1997-1 Principal Collection Subsubaccount on each
Distribution Date shall be distributed on such Distribution Date in accordance
with subsection 3A.06(c). No amounts on deposit in the Series 1997-1 Principal
Collection Sub-subaccount shall be distributed by the Trustee to the Company
during the Series 1997-1 Amortization Period.
(d) On each Business Day an amount equal to the Series 1997-1 Daily
Interest Expense for such day shall be transferred by the Trustee, based solely
on the information provided to the Trustee by the Master Servicer in the Daily
Report (upon which the Trustee may conclusively rely, subject to its obligation
to perform the procedures set forth in the Internal Operating Procedures
Memorandum), from the Series 1997-1 Non-Principal Collection Sub-subaccount to
the Series 1997-1 Accrued Interest Sub-subaccount.
(e) The allocations to be made pursuant to this Section 3A.03 are
subject to the provisions of Sections 2.05, 2.06, 7.02, 9.01 and 9.03 of the
Agreement.
SECTION 3A.04. Determination of Interest. (a) The amount of interest
distributable with respect to the Term Certificates on each Distribution Date
for the Accrual Period then ending shall be determined as follows:
(i) for the Class A Certificates, an amount (the "Class A Monthly
Interest") equal to the product of (A) the Class A Certificate Rate for
such Accrual Period; (B) the Class A Invested Amount on the first day of
such Accrual Period (after giving effect to any distributions of principal
on such date); and (C) the actual number of days in such Accrual Period
divided by 360; provided that if any additional Class A Certificates have
been issued on any Subsequent Issuance Date, the Class A Monthly Interest
shall equal the sum of the monthly interest amount for each outstanding
tranche of Class A Certificates (based on
<PAGE>
Series 1997-1 Supplement 47
the outstanding Invested Amount and the applicable Class A Certificate
Rate in respect of such tranche);
(ii) for the Class B Certificates, an amount (the "Class B Monthly
Interest") equal to the product of (A) the Class B Certificate Rate for
such Accrual Period; (B) the Class B Invested Amount on the first day of
such Accrual Period (after giving effect to any distributions of principal
on such date); and (C) the actual number of days in such Accrual Period
divided by 360; provided that if any additional Class B Certificates have
been issued on any Subsequent Issuance Date, the Class B Monthly Interest
shall equal the sum of the monthly interest amount for each outstanding
tranche of Class B Certificates (based on the outstanding Invested Amount
and the applicable Class B Certificate Rate in respect of such tranche);
(iii) for the Class C Certificates, an amount (the "Class C Monthly
Interest") equal to the product of (A) the Class C Certificate Rate for
such Accrual Period; (B) the Class C Invested Amount on the first day of
such Accrual Period (after giving effect to any distributions of principal
on such date); and (C) the actual number of days in such Accrual Period
divided by 360; provided that if any additional Class C Certificates have
been issued on any Subsequent Issuance Date, the Class C Monthly Interest
shall equal the sum of the monthly interest amount for each outstanding
tranche of Class C Certificates (based on the outstanding Invested Amount
and the applicable Class C Certificate Rate in respect of such tranche);
and
(iv) the Master Servicer shall notify the Trustee in writing (upon
which the Trustee may conclusively rely) on each Settlement Report Date of
the amounts calculated pursuant to clauses (i), (ii) and (iii) above.
<PAGE>
Series 1997-1 Supplement 48
(b) (i) On each Distribution Date, the Master Servicer shall
determine the excess, if any (the "Class A Interest Shortfall"), of (A) the
Class A Monthly Interest for the Accrual Period ending on such Distribution Date
over (B) the amount that is available to be distributed to the Class A
Certificateholders on such Distribution Date in respect thereof pursuant to this
Supplement. If the Class A Interest Shortfall with respect to any Distribution
Date is greater than zero, an additional amount ("Class A Additional Interest")
equal to the product, for the next Accrual Period (or portion thereof) until
such Class A Interest Shortfall is repaid, of (A) a rate per annum equal to the
Class A Certificate Rate for the next Accrual Period; (B) such Class A Interest
Shortfall (or the portion thereof that has not been paid to the Class A
Certificateholders); and (C) the actual number of days in the next Accrual
Period divided by 360, shall be payable as provided herein with respect to the
Class A Certificates on each Distribution Date following such Distribution Date
to and including the Distribution Date on which such Class A Interest Shortfall
is paid in full to the Class A Certificateholders.
(ii) On each Distribution Date, the Master Servicer shall determine
the excess, if any (the "Class B Interest Shortfall"), of (A) the Class B
Monthly Interest for the Accrual Period ending on such Distribution Date over
(B) the amount that is available to be distributed to the Class B
Certificateholders on such Distribution Date in respect thereof pursuant to this
Supplement. If the Class B Interest Shortfall with respect to any Distribution
Date is greater than zero, an additional amount ("Class B Additional Interest")
equal to the product, for the next Accrual Period (or portion thereof) until
such Class B Interest Shortfall is repaid, of (A) a rate per annum equal to the
Class B Certificate Rate for the next Accrual Period; (B) such Class B Interest
Shortfall (or the portion thereof that has not been paid to the Class B
Certificateholders); and (C) the actual number of days in such Accrual Period
divided by 360, shall be payable as provided herein with respect to the Class B
Certificates on each Distribution Date following
<PAGE>
Series 1997-1 Supplement 49
such Distribution Date to and including the Distribution Date on which such
Class B Interest Shortfall is paid in full to the Class B Certificateholders.
(iii) On each Distribution Date, the Master Servicer shall determine
the excess, if any (the "Class C Interest Shortfall"), of (A) the Class C
Monthly Interest for the Accrual Period ending on such Distribution Date over
(B) the amount that is available to be distributed to the Class C
Certificateholders on such Distribution Date in respect thereof pursuant to this
Supplement. If the Class C Interest Shortfall with respect to any Distribution
Date is greater than zero, an additional amount ("Class C Additional Interest")
equal to the product, for the next Accrual Period (or portion thereof) until
such Class C Interest Shortfall is repaid, of (A) a rate per annum equal to the
Class C Certificate Rate for the next Accrual Period; (B) such Class C Interest
Shortfall (or the portion thereof that has not been paid to the Class C
Certificateholders); and (C) the actual number of days in such Accrual Period
divided by 360, shall be payable as provided herein with respect to the Class C
Certificates on each Distribution Date following such Distribution Date to and
including the Distribution Date on which such Class C Interest Shortfall is paid
in full to the Class C Certificateholders.
SECTION 3A.05. Determination of Series 1997-1 Principal. (a)
Payments of Series 1997-1 Monthly Principal. The amount (the "Series 1997-1
Monthly Principal Payment") distributable from the Series 1997-1 Principal
Collection Sub-subaccount on each Distribution Date during the Series 1997-1
Amortization Period shall be equal to the amount on deposit in such account on
the immediately preceding Settlement Report Date; provided that the Series
1997-1 Monthly Principal Payment on any Distribution Date shall not exceed the
Series 1997-1 Invested Amount on such Distribution Date after giving effect to
the reductions and increases pursuant to paragraphs (b) and (c) below.
<PAGE>
Series 1997-1 Supplement 50
(b) Reductions to Series 1997-1 Principal. If, on any Special
Allocation Settlement Report Date, the Series 1997-1 Allocable Charged-Off
Amount is greater than zero for the related Settlement Period, the Trustee shall
in accordance with the written directions of the Master Servicer (upon which the
Trustee may conclusively rely, subject to its obligation to perform the
procedures set forth in the Internal Operating Procedures Memorandum) make the
following applications of such amounts in the following order of priority:
(i) the Series 1997-1 Required Subordinated Amount shall be reduced
(but not below zero) by an amount equal to the Series 1997-1 Allocable
Charged-Off Amount (which shall also be reduced by the amount so applied);
(ii) then, to the extent that the Series 1997-1 Allocable
Charged-Off Amount is greater than zero following the application in
clause (i) above, the Class C Invested Amount shall be reduced (but not
below zero) by an amount equal to such remaining Series 1997-1 Allocable
Charged-Off Amount (which shall also be reduced by the amount so applied);
(iii) then, to the extent that the Series 1997-1 Allocable
Charged-Off Amount is greater than zero following the applications in
clause (i) and (ii) above, the Class B Invested Amount shall be reduced
(but not below zero) by an amount equal to such remaining Series 1997-1
Allocable Charged-Off Amount (which shall also be reduced by the amount so
applied); and
(iv) then, to the extent that the Series 1997-1 Allocable
Charged-Off Amount is greater than zero following the applications in
clause (i), (ii) and (iii) above, the Class A Invested Amount shall be
reduced (but not below zero) by an amount equal to such remaining Series
1997-1 Allocable Charged-Off Amount (which shall also be reduced by the
amount so applied).
<PAGE>
Series 1997-1 Supplement 51
(c) Increases to Series 1997-1 Principal. If, on any Special
Allocation Settlement Report Date, the Series 1997-1 Allocable Recoveries Amount
is greater than zero for the related Settlement Period, the Trustee shall in
accordance with the written directions of the Master Servicer (upon which the
Trustee may conclusively rely, subject to its obligation to perform the
procedures set forth in the Internal Operating Procedures Memorandum) make the
following applications (after giving effect to the applications in paragraph (b)
of such amount in the following order of priority):
(i) the Class A Invested Amount shall be increased (but only to the
extent of any previous reductions of the Class A Invested Amount pursuant
to subsection 3A.05(b)(iv)) by the amount of the Series 1997-1 Allocable
Recoveries Amount (which shall also be reduced by the amount so applied);
(ii) then, to the extent that the Series 1997-1 Allocable Recoveries
Amount is greater than zero following the application in clause (i) above,
the Class B Invested Amount shall be increased (but only to the extent of
any previous reductions of the Class B Invested Amount pursuant to
subsection 3A.05(b)(iii)) by such remaining Series 1997-1 Allocable
Recoveries Amount (which shall also be reduced by the amount so applied);
(iii) then, to the extent that the Series 1997-1 Allocable Recoveries
Amount is greater than zero following the applications in clause (i) and
(ii) above, the Class C Invested Amount shall be increased (but only to
the extent of any previous reductions of the Class C Invested Amount
pursuant to subsection 3A.05(b)(ii)) by such remaining Series 1997- 1
Allocable Recoveries Amount (which shall also be reduced by the amount so
applied); and
<PAGE>
Series 1997-1 Supplement 52
(iv) then, to the extent that the Series 1997-1 Allocable Recoveries
Amount is greater than zero following the applications in clause (i), (ii)
and (iii) above, the Series 1997-1 Required Subordinated Amount shall be
increased (but only to the extent of any previous reductions of the Series
1997-1 Required Subordinated Amount pursuant to subsection 3A.05(b)(i)) by
such remaining Series 1997-1 Allocable Recoveries Amount (which shall also
be reduced by the amount so applied).
SECTION 3A.06. Applications. (a) The Trustee shall distribute, based
solely on the information provided to the Trustee by the Master Servicer in the
Daily Report (upon which the Trustee may conclusively rely, subject to its
obligation to perform the procedures set forth in the Internal Operating
Procedures Memorandum), on each Distribution Date, from amounts on deposit in
the Series 1997-1 Accrued Interest Sub-subaccount in the following order of
priority to the extent funds are available:
(i) an amount equal to the Class A Monthly Interest payable on such
Distribution Date, plus the amount of any Class A Monthly Interest
previously due but not distributed to the Class A Certificateholders on a
prior Distribution Date, plus the amount of any Class A Additional
Interest for such Distribution Date and any Class A Additional Interest
previously due but not distributed to the Class A Certificateholders on a
prior Distribution Date, to the Class A Certificateholders; provided,
however, that during the Series 1997-1 Amortization Period, no Class A
Additional Interest will be paid until repayment in full of the Series
1997-1 Invested Amount and all Class A Monthly Interest, Class B Monthly
Interest and Class C Monthly Interest has been paid;
(ii) an amount equal to the Class B Monthly Interest payable on such
Distribution Date, plus the amount of any Class B Monthly Interest
previously due
<PAGE>
Series 1997-1 Supplement 53
but not distributed to the Class B Certificateholders on a prior
Distribution Date, plus the amount of any Class B Additional Interest for
such Distribution Date and any Class B Additional Interest previously due
but not distributed to the Class B Certificateholders on a prior
Distribution Date, to the Class B Certificateholders; provided, however,
that during the Series 1997-1 Amortization Period, no Class B Additional
Interest will be paid until repayment in full of the Series 1997-1
Invested Amount and all Class A Monthly Interest, Class B Monthly Interest
and Class C Monthly Interest has been paid; and
(iii) an amount equal to the Class C Monthly Interest payable on
such Distribution Date, plus the amount of any Class C Monthly Interest
previously due but not distributed to the Class C Certificateholders on a
prior Distribution Date, plus the amount of any Class C Additional
Interest for such Distribution Date and any Class C Additional Interest
previously due but not distributed to the Class C Certificateholders on a
prior Distribution Date, to the Class C Certificateholders; provided,
however, that during the Series 1997-1 Amortization Period, no Class C
Additional Interest will be paid until repayment in full of the Series
1997-1 Invested Amount and all Class A Monthly Interest, Class B Monthly
Interest and Class C Monthly Interest has been paid. Unless otherwise
directed by the Company, the Trustee shall withhold in accordance with
Section 1446 of the Code on payments of interest allocable to Class C
Certificateholders who are Foreign Investors unless such Class C
Certificateholders provide the Trustee with (i) a properly executed
Internal Revenue Service Form 4224 (or successor form) and (ii) upon
request by the Trustee and in a form acceptable to the Trustee, evidence
documenting the inclusion in gross income of, and the payment of
appropriate U.S. taxes, if any, on, that portion of the Trust's net income
allocable to such Class C Certificateholders.
<PAGE>
Series 1997-1 Supplement 54
(b) On each Distribution Date, the Trustee shall apply, based solely
on the information provided to the Trustee by the Master Servicer in the Daily
Report (upon which the Trustee may conclusively rely, subject to its obligation
to perform the procedures set forth in the Internal Operating Procedures
Memorandum), funds on deposit in the Series 1997-1 Non-Principal Collection
Sub-subaccount in the following order of priority to the extent funds are
available:
(i) an amount equal to the Series 1997-1 Monthly Servicing Fee for
the Accrual Period ending on such Distribution Date shall be withdrawn
from the Series 1997-1 Non-Principal Collection Sub-subaccount by the
Trustee and paid to the Master Servicer (less any amount payable to the
Trustee pursuant to Section 8.05 of the Agreement which shall be paid to
the Trustee); and
(ii) an amount equal to any Program Costs due and payable shall be
withdrawn from the Series 1997-1 Non-Principal Collection Sub-subaccount
by the Trustee and paid to the Persons owed such amounts.
Any remaining amount on deposit in the Series 1997-1 Non-Principal Collection
Sub-subaccount (in excess of the Accrued Expense Amount as of such day) not
allocated pursuant to clauses (i) and (ii) above shall be paid to the holder of
the Series 1997-1 Subordinated Interest; provided, however, that during the
Series 1997-1 Amortization Period, such remaining amounts shall be deposited in
the Series 1997-1 Principal Collection Sub-subaccount for distribution in
accordance with subsection 3A.06(c).
(c) During the Series 1997-1 Amortization Period, the Trustee shall
apply, based solely on the information provided to the Trustee by the Master
Servicer in the Daily Report (upon which the Trustee may conclusively rely,
subject to its obligation to perform the procedures set forth in the Internal
Operating Procedures Memorandum), on
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Series 1997-1 Supplement 55
each Distribution Date, amounts on deposit in the Series 1997-1 Principal
Collection Sub-subaccount in the following order of priority:
(i) if any amounts are owed to the Trustee or any other Person, on
account of Servicing Fees incurred in respect of the performance of its
responsibilities as Successor Master Servicer or Successor Servicer, as
the case may be, an amount equal to the product of (a) the amount so owed
to such Successor Master Servicer or Successor Servicer, as the case may
be, and (b) a fraction, the numerator of which shall be equal to the
Series 1997-1 Invested Amount as of the end of the immediately preceding
Settlement Period and the denominator of which shall be equal to the
Aggregate Invested Amount as of the end of the immediately preceding
Settlement Period shall be transferred from the Series 1997-1 Principal
Collection Sub-subaccount to the Trustee or such other Person;
(ii) following the repayment in full of all amounts set forth in
clause (i) above, an amount equal to the Series 1997-1 Monthly Principal
Payment for such Distribution Date (rounded down to the nearest $1,000,000
unless such payment is less than $1,000,000) shall be distributed from the
Series 1997-1 Principal Collection Sub-subaccount:
(A) first, pro rata to the Class A Certificateholders until
repayment in full of the Class A Invested Amount;
(B) second, pro rata to the Class B Certificateholders until
repayment in full of the Class B Invested Amount; and
(C) third, pro rata to the Class C Certificateholders until
repayment in full of the Class C Invested Amount;
<PAGE>
Series 1997-1 Supplement 56
(iii) if, following the repayment in full of all amounts set forth
in clauses (i) and (ii) above, any amounts are owed to the Trustee or any
other Person, on account of its fees, expenses and disbursements incurred
in respect of the performance of its responsibilities hereunder (other
than pursuant to clause (i) above), such amounts shall be transferred from
the Series 1997-1 Principal Collection Sub-subaccount and paid to the
Trustee or such other Person; and
(iv) following the repayment in full of all amounts set forth in
clauses (i) through (iii) above, the remaining amount on deposit in the
Series 1997-1 Principal Collection Sub-subaccount on such Distribution
Date, if any, shall be distributed to the holder of the Series 1997-1
Subordinated Interest.
(d) On each Special Distribution Date occurring in respect of a
Reduction hereunder, the Trustee shall, based solely on the written instructions
of the Master Servicer (upon which the Trustee may conclusively rely),
distribute to the Term Certificateholders on such Special Distribution Date (pro
rata based on the initial invested amount of each Class), from amounts on
deposit in the Series 1997-1 Principal Collection Sub-subaccount an amount equal
to the Reduction Amount to be made on such Special Distribution Date.
ARTICLE IV
Distributions and Reports
Article IV of the Agreement (except for any portion thereof relating
to another Series) shall read in its entirety as follows and the following shall
be
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Series 1997-1 Supplement 57
exclusively applicable to the Term Certificates issued pursuant to this
Supplement:
SECTION 4A.0l. Distributions. (a) The final distribution of
principal in respect of the Term Certificates will be made after due notice by
the Trustee of the pendency of such distribution (subject to at least five
Business Days' prior written notice from the Master Servicer to the Trustee
containing all information required for the Trustee's notice, upon which the
Trustee may conclusively rely, subject to its obligation to perform the
procedures set forth in the Internal Operating Procedures Memorandum) and only
upon presentation and surrender of such Term Certificates at the office of the
Paying Agent or at the Corporate Trust Office of the Trustee, by check drawn on,
or by transfer to an account maintained by the holder with, a bank in New York
City. Any other distribution of principal in respect of the Term Certificates or
on account of interest or fees on the Term Certificates on each Distribution
Date will be made or caused to be made by the Paying Agent or the Trustee to the
persons in whose name the Term Certificates are registered at the close of
business on the related Record Date. Such payment will be made by a check mailed
to the Term Certificateholders at such Term Certificateholders' registered
addresses or, upon application by any Term Certificateholder of at least
$5,000,000 in original principal amount thereof to the Trustee not later than
five Business Days prior to the related Distribution Date, by transfer to an
account maintained by the Term Certificateholder with a bank in New York City.
(b) All allocations and distributions hereunder shall be in
accordance with the Daily Reports and the Monthly Settlement Statements and
subject to Section 3.01(h) of the Agreement.
SECTION 4A.02. Statements and Notices. (a) Monthly Settlement
Statements. On each Settlement Report Date (commencing with the Settlement
Report Date
<PAGE>
Series 1997-1 Supplement 58
occurring in March 1997), the Master Servicer shall deliver to the Trustee and
each Rating Agency a Monthly Settlement Statement in the Form of Exhibit E
setting forth, among other things, the Loss Reserve Ratio I, the Loss Reserve
Ratio II, the Dilution Reserve Ratio I, the Dilution Reserve Ratio II, the
Minimum Ratio, in each case, where applicable, with respect to the Class A
Certificates, the Class B Certificates and the Class C Certificates, and the
Carrying Cost Reserve Ratio and the Servicing Reserve Ratio, each as
recalculated for the next succeeding Settlement Period. The Trustee shall
forward a copy of each Monthly Settlement Statement to any Term
Certificateholder upon request by such Term Certificateholder.
(b) Annual Certificateholders' Tax Statement. On or before April 1
of each calendar year (or such earlier date as required by applicable law),
beginning with calendar year 1998, the Company shall furnish, or cause to be
furnished, to each Person who at any time during the preceding calendar year was
a Term Certificateholder, a statement prepared by the Company containing the
aggregate amount distributed to such Person for such calendar year or the
applicable portion thereof during which such Person was a Term
Certificateholder, together with such other information as is required to be
provided by an issuer of indebtedness under the Code and such other customary
information as the Company deems necessary to enable the Term Certificateholders
to prepare their tax returns. Such obligation of the Company shall be deemed to
have been satisfied to the extent that substantially comparable information
shall have been provided by the Trustee pursuant to any requirements of the Code
as from time to time in effect. The Trustee shall be under no obligation to
prepare tax returns for the Trust.
(c) Early Amortization Event Notices. As promptly as reasonably
practicable after its receipt of notice of the occurrence of an Early
Amortization Event with respect to Series 1997-1, the Trustee shall give notice
of such occurrence to (i) each Rating Agency (which notice
<PAGE>
Series 1997-1 Supplement 59
shall in any event be given, by telephone or otherwise, not later than the
second Business Day after such receipt) and (ii) each Term Certificateholder.
SECTION 4A.03. Notices. Notices required to be given to the Holders
hereunder shall be given by first class mail to the address of such Holders as
they appear in the Certificate Register or the Subordinated Interest Register,
as applicable. The Company and the Master Servicer shall deliver copies of all
notices, reports, statements and other documents delivered by it pursuant to the
Pooling and Servicing Agreements to each Rating Agency.
ARTICLE V
Additional Early Amortization Events
SECTION 5.01. Additional Early Amortization Events. If any one of
the events specified in Section 7.01 of the Agreement (after any grace periods
or consents applicable thereto) or any one of the following events (each, an
"Early Amortization Event") shall occur during the Series 1997-1 Revolving
Period:
(a) (i) failure on the part of the Master Servicer to direct any
payment to be made, or failure of any payment to be made, in respect of
interest owing on any Term Certificates within two Business Days of the
date such interest is due or (ii) failure on the part of the Master
Servicer to direct any payment to be made, or of the Company to make any
payment in respect of any other amounts owing by the Company, under any
Pooling and Servicing Agreement to or for the benefit of the Term
Certificateholders within five Business Days of the date such other amount
is due;
(b) failure on the part of the Company duly to observe or perform in
any material respect any covenant or agreement of the Company set forth in
any Pooling
<PAGE>
Series 1997-1 Supplement 60
and Servicing Agreement (including each covenant contained in Sections
2.07 and 2.08 of the Agreement) that continues unremedied 30 days after
the earlier of (i) the date on which a Responsible Officer of the Company
or, so long as the Master Servicer is an Affiliate of the Company, a
Responsible Officer of the Master Servicer has knowledge of such failure
and (ii) the date on which written notice of such failure, requiring the
same to be remedied, shall have been given to the Company by the Trustee,
or to the Company and the Trustee by holders of the Term Certificates
evidencing 25% or more of the Series 1997-1 Invested Amount;
(c) any representation or warranty made or deemed made by the
Company in any Pooling and Servicing Agreement to or for the benefit of
the Term Certificateholders shall prove to have been incorrect in any
material respect when made or when deemed made that continues to be
incorrect 30 days after the earlier of (i) the date on which a Responsible
Officer of the Company or, so long as the Master Servicer is an Affiliate
of the Company, a Responsible Officer of the Master Servicer has knowledge
of such failure and (ii) the date on which notice of such failure,
requiring the same to be remedied, shall have been given to the Company by
the Trustee or to the Company and the Trustee by holders of the Term
Certificates evidencing 25% or more of the Series 1997-1 Invested Amount
and as a result of such incorrectness, the interests, rights or remedies
of the Term Certificateholders have been materially and adversely
affected; provided, however, that an Early Amortization Event with respect
to Series 1997-1 shall not be deemed to have occurred under this paragraph
if the incorrectness of such representation or warranty gives rise to an
obligation to repurchase or make an adjustment payment in respect of the
related Receivables and the Company has repurchased or made an adjustment
payment in respect of the related Receivable
<PAGE>
Series 1997-1 Supplement 61
or all such Receivables, if applicable, in accordance with the provisions
of any Pooling and Servicing Agreement within 10 Business Days of when the
Company was obligated to do so;
(d) a Servicer Default with respect to (i) the Master Servicer other
than any Servicer Default that is within subsection 5.01(a) above, or (ii)
one or more Servicers that are responsible for servicing Receivables
representing 15% or more of the Aggregate Receivables Amount shall have
occurred and be continuing; or
(e) the Series 1997-1 Allocated Receivables Amount shall be less
than the Series 1997-1 Target Receivables Amount for any period of five
consecutive Business Days;
(f) a Purchase Termination Event with respect to one or more Sellers
that are responsible for originating Receivables representing 5% or more
of the Aggregate Receivables Amount shall have occurred and be continuing;
(g) a Change in Control shall have occurred;
(h) any of the Agreement, the Servicing Agreement, this Supplement
or the Receivables Sale Agreement shall cease, for any reason, to be in
full force and effect, or the Company, any Seller, any Servicer, the
Master Servicer or any Affiliate thereof shall so assert in writing;
(i) the Trust shall for any reason cease to have a valid and
perfected first priority undivided ownership or first priority security
interest in any of the Trust Assets (subject to no other Liens other than
any Permitted Liens) and such cessation would individually, or together
with other cessations, have a Material Adverse Effect;
<PAGE>
Series 1997-1 Supplement 62
(j) a Federal tax notice of Lien, in an amount equal to or greater
than $1,000,000 shall have been filed against the Company or the Trust
unless there shall have been delivered to the Trustee and the Rating
Agencies proof of release of such Lien;
(k) a notice of Lien shall have been filed by the Pension Benefit
Guaranty Corporation against 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 unless there shall have been delivered
to the Trustee and the Rating Agencies proof of the release of such Lien;
(l) a Reduction shall have occurred and, as a result of such
Reduction, the Series 1997-1 Invested Amount shall have been reduced to an
amount below $75,000,000; or
(m) (i) one or more judgments for the payment of money (to the
extent not bonded or covered by insurance to the reasonable satisfaction
of the Trustee) shall be rendered against the Company (A) in an aggregate
amount greater than $50,000 or (B) that, individually or in the aggregate,
have resulted or could reasonably be expected to result in a Company
Material Adverse Effect or (ii) one or more judgments for the payment of
money (to the extent not bonded or covered by insurance to the reasonable
satisfaction of the Trustee) shall be rendered against the Master
Servicer, any Servicer, any Seller or any combination thereof (A) in an
aggregate amount greater than $7,500,000 or (B) that, individually or in
the aggregate, have resulted or could reasonably be expected to result in
a Servicer Material Adverse Effect or a Seller Material Adverse Effect, as
applicable, with respect to one or more Servicers or Sellers, as
applicable, that are responsible for servicing or originating, as the case
<PAGE>
Series 1997-1 Supplement 63
may be, 5% or more of the Aggregate Receivables Amount and, in either
case, the same shall remain undischarged for a period of 30 consecutive
days during which execution shall not be effectively stayed, or any action
shall be legally taken by a judgment creditor to levy upon the assets or
properties of the Company, the Master Servicer, any Servicer or any Seller
to enforce any such judgment;
then, in the case of (x) any event described in Section 7.01 of the Agreement,
automatically without any notice or action on the part of the Trustee or the
holders of the Term Certificates, an early amortization period shall immediately
commence or (y) an event described above, after the applicable grace period (if
any) set forth in the applicable subsection, the Trustee may, and at the written
direction of the Majority Term Certificateholders voting as a single class
shall, by written notice then given to the Company and the Master Servicer,
declare that an early amortization period has commenced as of the date of such
notice with respect to Series 1997-1 (any such period under clause (x) or (y)
above an "Early Amortization Period"); provided, however, that in the case of
the event described in clause (e) above, if an Early Amortization Period has not
been declared within 10 Business Days from the occurrence of such event, then an
Early Amortization Period shall occur automatically unless, (i) prior to the end
of such 10 Business Day period, the Series 1997-1 Allocated Receivables Amount
shall no longer be less than the Series 1997-1 Target Receivables Amount and
(ii) so long as the Series 1997-1 Allocated Receivables Amount continues to be
equal to or greater than the Series 1997-1 Target Receivables Amount, Term
Certificateholders evidencing 66-2/3% or more of the Series 1997-1 Invested
Amount voting as a single class shall have waived the occurrence of such event.
Notwithstanding the foregoing, a delay in or failure in performance
referred to in clause (a) above for a period of five Business Days after the
applicable grace period, or in clause (b) above for a period of 30 Business
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Series 1997-1 Supplement 64
Days after the applicable grace period, will not constitute an Early
Amortization Event if such delay or failure could not have been prevented by the
exercise of reasonable diligence by the Company and such delay or failure was
caused by a Force Majeure Delay. The Company will nevertheless be required to
use its best efforts to perform its obligations in a timely manner in accordance
with the terms of the Transaction Documents, and the Company shall promptly give
the Trustee an Officer's Certificate notifying it of any such delay or failure.
ARTICLE VI
Servicing Fee
SECTION 6.01. Servicing Compensation. A monthly servicing fee (the
"Series 1997-1 Monthly Servicing Fee") shall be payable to the Master Servicer
on each Distribution Date for the preceding Settlement Period, in an amount
equal to the product of (a) the Servicing Fee and (b) a fraction, the numerator
of which shall be equal to the Series 1997-1 Invested Amount as of the end of
the second preceding Settlement Period and the denominator of which shall be
equal to the Aggregate Invested Amount as of the end of such second preceding
Settlement Period; provided, however, that, for the purpose of calculating the
Accrued Expense Adjustment on the last Business Day of any Accrual Period, such
calculation shall be based on the Series 1997-1 Invested Amount and Aggregate
Invested Amount as of the end of the most recent Settlement Period that has
elapsed. To the extent that funds on deposit in the Series 1997-1 Non-Principal
Collection Sub-subaccount at any such date are insufficient to pay the Series
1997-1 Monthly Servicing Fee due on such date as set forth in the Monthly
Settlement Statement delivered by the Master Servicer to the Trustee, the
Trustee shall so notify the Company and the Company shall immediately pay the
Master Servicer the amount of any such deficiency.
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Series 1997-1 Supplement 65
ARTICLE VII
Covenants, Representations and Warranties
SECTION 7.01. Representations and Warranties of the Company and the
Master Servicer. The Company and the Master Servicer each hereby represents and
warrants to the Trustee and each of the Term Certificateholders that each and
every of their respective representations and warranties contained in each
Pooling and Servicing Agreement is true and correct as of the Issuance Date and
any Subsequent Issuance Date.
SECTION 7.02. Covenants of the Company and the Master Servicer. The
Company and the Master Servicer each hereby agree, in addition to their
obligations under the Agreement and the Servicing Agreement, that:
(a) they shall not terminate the Agreement unless in compliance with
the terms of the Agreement and the supplements relating to each
Outstanding Series;
(b) they will (i) provide the Trustee with evidence, satisfactory to
the Trustee, of (A) the establishment of a disaster recovery plan, (B) the
establishment of computer back-up systems and (C) the operational
readiness of an off-site disaster recovery facility and (ii) deliver to
the Trustee executed copies of any landlord waivers, in a form reasonably
acceptable to the Trustee, that may be necessary to grant to the Trustee
access to any leased premises of the Master Servicer for which the Trustee
may require access to perform the collection and administrative functions
to be performed by the Trustee under the Transaction Documents;
(c) for so long as any Term Certificates are outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, the Company will cause to be provided to any holder of
Term
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Series 1997-1 Supplement 66
Certificates and any prospective purchaser of Term Certificates or an
interest therein, upon the request of such holder or prospective
purchaser, the information required to be provided to such holder or
prospective purchaser by Rule 144A(d)(4) under the Securities Act;
(d) they will not at any time participate in the listing of the
Class C Certificates on an "established securities market" within the
meaning of Section 7704(b)(1) of the Code;
(e) the Company will not cooperate in any way to facilitate, and the
Company will affirmatively take any reasonable action to prevent any of
the following of which a Responsible Officer of the Company has actual
knowledge, (i) the registration, listing or trading of the Class C
Certificates on any national, foreign, regional, local or other stock
exchange or PORTAL or (ii) the development or existence of an "over the
counter" market for the Class C Certificates (including an interdealer
quotation system that regularly disseminates firm buy or sell quotations
by identified brokers or dealers by electronic means or otherwise); and
(f) it shall observe in all material respects each and every of its
respective covenants (both affirmative and negative) contained in the
Agreement, the Servicing Agreement, this Supplement and all other
Transaction Documents to which it is a party.
SECTION 7.03. Negative Covenant of the Company; Covenants of the
Master Servicer. (a) The Company shall not make any Restricted Payment while
Series 1997-1 is an Outstanding Series, except (i) from amounts distributed to
the Company pursuant to subsection 3A.03(c), (ii) in compliance with all terms
of the Transaction Documents, including the Company's covenant as to net worth
set forth
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Series 1997-1 Supplement 67
in subsection 2.07(m) of the Agreement and (iii) such Restricted Payment is made
no more frequently than on a monthly basis and such Restricted Payment is made
in accordance with all corporate and legal formalities applicable to the
Company; provided that no Restricted Payment shall be made if an Early
Amortization Event has occurred and is continuing (or would occur as a result of
making such Restricted Payment).
(b) The Master Servicer hereby agrees that it shall observe each and
all of its respective covenants (both affirmative and negative) contained in
each Pooling and Servicing Agreement in all material respects.
SECTION 7.04. Covenant of the Trustee. Neither the Trustee nor any
agent of the Trustee (including the Authenticating Agent and the Paying Agent)
will knowingly take any action with the intent of facilitating (i) the
registration, listing or trading of the Class C Certificates on any national,
foreign, regional, local or other stock exchange or PORTAL or (ii) the
development or existence of an "over the counter" market for the Class C
Certificates (including an interdealer quotation system that regularly
disseminates firm buy or sell quotations by identified brokers or dealers by
electronic means or otherwise).
ARTICLE VIII
Miscellaneous
SECTION 8.01. Ratification of Agreement. As modified and
supplemented by this Supplement, the Agreement is in all respects ratified and
confirmed and the Agreement as so supplemented by this Supplement shall be read,
taken and construed as one and the same instrument.
SECTION 8.02. Governing Law. THIS SUPPLEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO ANY
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Series 1997-1 Supplement 68
CONFLICT OF LAW PRINCIPLES, EXCEPT TO THE EXTENT ISSUES OF PERFECTION ARE
GOVERNED BY THE LAWS OF ANOTHER JURISDICTION.
SECTION 8.03. Further Assurances. Each of the Company, the Master
Servicer and the Trustee agrees, from time to time, to do and perform any and
all acts and to execute any and all further instruments required or reasonably
requested by the other more fully to effect the purposes of this Supplement and
the sale of the Term Certificates hereunder, including, without limitation, in
the case of the Company and the Master Servicer, the execution of any financing
or registration statements or similar documents or notices or continuation
statements relating to the Receivables and the other Trust Assets for filing or
registration under the provisions of the UCC or similar legislation of any
applicable jurisdiction provided that, in the case of the Trustee, in
furtherance and without limiting the generality of subsection 8.01(d) of the
Agreement, the Trustee shall have received reasonable assurance of adequate
reimbursement and indemnity in connection with taking such action before the
Trustee shall be required to take any such action.
SECTION 8.04. No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the Trustee or any Term
Certificateholder, any right, remedy, power or privilege hereunder, shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exhaustive of any rights, remedies, powers and privileges provided by law.
SECTION 8.05. Amendments. This Supplement may only be amended,
supplemented or otherwise modified from time to time if such amendment,
supplement or modification is effected in accordance with the provisions of
Section 10.01 of the Agreement; provided that any amendment,
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Series 1997-1 Supplement 69
supplement or modification which is governed by Section 10.01(b) of the
Agreement and relates to an amendment, supplement or modification of Article
III, Article IV, the definition of the Class A Ratio, the Class B Ratio, the
Class C Ratio and Series 1997-1 Required Subordinated Amount and any defined
terms used therein shall require the consent of Term Certificateholders
evidencing more than 50% of the Invested Amount of each Class adversely affected
in any material respect by such amendment, supplement or modification.
SECTION 8.06. Notices. All notices, requests and demands to or upon
any party hereto to be effective shall be given in the manner set forth in the
case of the Company, the Master Servicer and the Trustee, in Section 10.05 of
the Agreement, and in the case of any other party, in writing (including a
confirmed transmission 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
Rating Agencies or to such other address as may be hereafter notified by the
respective parties hereto:
DCR: Duff & Phelps Credit Rating Co.
55 East Monroe Street
Chicago, Illinois 60603
Attention: Asset-Backed Research and
Monitoring Group
Telecopier: (312) 263-2852
S&P: Standard & Poor's Ratings Services
25 Broadway
New York, New York 10004
Attention: Asset-Backed Surveillance Group
Telecopier: (212) 412-0225
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Series 1997-1 Supplement 70
Any notice required or permitted to be mailed to a Term Certificateholder shall
be given as provided in Section 4A.03.
SECTION 8.07. Counterparts. This Supplement may be executed in any
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original,
and all of which taken together shall constitute one and the same agreement.
SECTION 8.08. No Bankruptcy Petition. Each Term Certificateholder
(and each Certificate Book-Entry Holder with respect to any Term Certificate)
shall be deemed to have agreed by its acceptance of a Term Certificate (or a
beneficial interest therein) that, prior to the date which is one year and one
day after the later of (i) the last day of the Series 1997-1 Amortization Period
and (ii) the date that all Investor Certificates of each other Outstanding
Series are repaid in full, 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 similar proceedings
under any Federal or state bankruptcy or similar law.
SECTION 8.09. Limitation on Addition and Termination of Sellers. (a)
Notwithstanding anything to the contrary contained in the Receivables Sale
Agreement or the Agreement, the Company shall not consent to the addition of a
Seller thereunder unless each of the following conditions shall have been
satisfied:
(i) Each of the conditions set forth in Section 3.05 of the
Receivables Sale Agreement shall have been satisfied and the Trustee shall
have received evidence in the form of an appropriate Officer's
Certificate as to that fact.
(ii) The Company and the Trustee shall have received evidence that
the Rating Agency Condition shall have been satisfied with respect to the
addition
<PAGE>
Series 1997-1 Supplement 71
of such Seller; provided that satisfaction of the Rating Agency Condition
(and such receipt of evidence thereof) shall not be required with respect
to the addition of up to three additional Sellers during any calendar
year, each of which meets the following criteria: (x) such proposed
additional Seller is, in the judgment of the Company as certified by the
Company to the Trustee in an Officer's Certificate, in the same line of
business as the existing Sellers as of the related Seller Addition Date
(as defined in the Receivables Sale Agreement) and (y) as of the Seller
Addition Date, immediately prior to giving effect to such addition, the
ratio (as determined by the Company and expressed as a percentage) of (I)
the aggregate Principal Amount of what would constitute all Eligible
Receivables of the proposed Seller if it were a Seller at the end of the
Business Day immediately preceding the Seller Addition Date minus the
amount which would constitute the Overconcentration Amount applicable to
such Receivables on the Seller Addition Date if the proposed Seller were a
Seller to (II) the Aggregate Receivables Amount on the Seller Addition
Date (before giving effect to such addition), is less than five percent.
(iii) The Company and the Trustee shall have received a certificate
prepared by a Responsible Officer of each Servicer certifying that after
giving effect to the addition of such Seller, the Aggregate Target
Receivables Amount shall equal or exceed the Aggregate Allocated
Receivables Amount on the related Seller Addition Date.
(iv) The Trustee shall have notified the Company and each Rating
Agency that a Standby Liquidation System is in place for such proposed
additional Seller.
(c) Notwithstanding anything to the contrary contained in the
Receivables Sale Agreement, the Company shall not consent to any request made
pursuant to
<PAGE>
Series 1997-1 Supplement 72
Section 9.14(b) thereof, nor shall any Seller which is the subject of such
request be terminated under the Receivables Sale Agreement, in each case unless
(i) no Early Amortization Event, Potential Early Amortization Event or Potential
Purchase Termination Event (as defined in the Receivables Sale Agreement) (other
than with respect to the Seller to be so terminated) has occurred and is
continuing (both before and after giving effect to such termination) and (ii)
the Trustee shall have received prior written notice of such termination (which
notice shall be accompanied by a pro forma Daily Report confirming that the
Aggregate Target Receivables Amount equals or exceeds the Aggregate Allocated
Receivables Amount, each calculated after giving effect to such termination and
excluding all Receivables originated by the Seller to be terminated).
(d) Upon the termination of a Seller pursuant to Section 9.14(b) of
the Receivables Sale Agreement and the foregoing paragraph (c), the calculation
(including, without limitation, for purposes of the pro forma calculations
pursuant to paragraph (c) above) of the Aggregate Target Receivables Amount, the
Aggregate Allocated Receivables Amount, the Series 1997-1 Required Subordinated
Amount and all other amounts from which each such amount is directly or
indirectly derived shall exclude in each case the Receivables originated by such
terminated Seller.
ARTICLE IX
Final Distributions
SECTION 9.01. Certain Distributions. (a) Not later than 2:00 p.m.,
New York City time, on the Distribution Date following the date on which the
proceeds from the disposition of the Receivables pursuant to subsection 7.02(b)
of the Agreement are deposited into the Series 1997-1 Non-Principal Collection
Sub-subaccount and the Series 1997-1 Principal Collection Sub-subaccount, the
<PAGE>
Series 1997-1 Supplement 73
Trustee shall distribute such amounts pursuant to Article III of this
Supplement.
(b) Notwithstanding anything to the contrary in this Supplement or
the Agreement, any distribution made pursuant to this Section shall be deemed to
be a final distribution pursuant to Section 9.03 of the Agreement with respect
to the Term Certificates.
<PAGE>
Series 1997-1 Supplement 74
IN WITNESS WHEREOF, the Company, the Master Servicer and the Trustee
have caused this Series 1997-1 Supplement to be duly executed by their
respective officers as of the day and year first above written.
LFI RECEIVABLES CORPORATION,
by
-------------------------------
Name:
Title:
LFI SERVICING CORPORATION, as
Master Servicer,
by
-------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, not in
its individual capacity but solely
as Trustee,
by
-------------------------------
Name:
Title:
<PAGE>
EXHIBIT A TO
SERIES 1997-1 SUPPLEMENT
LFI RECEIVABLES MASTER TRUST
FORM OF CLASS A CERTIFICATE, SERIES 1997-1
REGISTERED
NO. $ (of
$ issued)
CUSIP No.
[For Book-Entry Certificates Only: UNLESS THIS TERM CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW
YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
INTERESTS IN THIS TERM CERTIFICATE MAY ONLY BE HELD BY QUALIFIED
INSTITUTIONAL BUYERS (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT OF
1933).]
THIS TERM CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "ACT"). THE HOLDER HEREOF, BY PURCHASING THIS TERM CERTIFICATE,
AGREES THAT SUCH TERM CERTIFICATE MAY BE RESOLD, PLEDGED OR TRANSFERRED ONLY IN
ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS IN AN AMOUNT OF AT LEAST
$1,000,000 AND (1) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER
THE ACT ("RULE 144A"), TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OR ACCOUNTS OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A
OR (2) TO A PERSON WHO (A) IS AN
<PAGE>
2
INSTITUTIONAL "ACCREDITED INVESTOR", WITHIN THE MEANING OF RULE 501(a)(1), (2),
(3) OR (7) OF REGULATION D UNDER THE ACT, AND WHO DELIVERS A PURCHASER LETTER TO
THE TRUSTEE IN THE FORM ATTACHED TO THE SERIES 1997-1 SUPPLEMENT OR (B) IS
TAKING DELIVERY OF SUCH CERTIFICATE PURSUANT TO A TRANSACTION THAT IS OTHERWISE
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT, AS CONFIRMED IN AN OPINION
OF COUNSEL ADDRESSED TO THE TRUSTEE AND THE COMPANY WHICH OPINION AND COUNSEL
ARE SATISFACTORY TO THE COMPANY AND THE TRUSTEE.
THIS TERM CERTIFICATE MAY NOT BE ACQUIRED OR HELD BY OR ON BEHALF OF
(1) AN "EMPLOYEE BENEFIT PLAN" WITHIN THE MEANING OF SECTION 3(3) OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR OTHER RETIREMENT
ARRANGEMENT, INDIVIDUAL RETIREMENT ACCOUNT OR KEOGH PLAN, WHETHER OR NOT IT IS
SUBJECT TO THE PROVISIONS OF TITLE I THERETO, (2) ANY PLAN DESCRIBED IN SECTION
4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") OR (3)
ANY OTHER ENTITY THAT WOULD BE DEEMED TO BE A "BENEFIT PLAN INVESTOR" WITHIN THE
MEANING OF DEPARTMENT OF LABOR REGULATIONS SECTION 2510.3-101(f)(2) (ANY OF THE
FOREGOING, AN "ERISA ENTITY").
THIS TERM CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY
GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY OTHER PERSON.
Purchasers of this Term Certificate will be deemed to have made
certain representations and warranties set forth in the Supplement.
This Class A Certificate evidences a fractional undivided interest
in the assets of the
LFI RECEIVABLES MASTER TRUST
the corpus of which consists of receivables representing amounts payable for
goods or services, which receivables have been purchased by LFI Receivables
Corporation, a
<PAGE>
3
Delaware corporation, which in turn transferred and assigned such receivables to
the LFI Receivables Master Trust.
(Not an interest in or obligation of
LFI Receivables Corporation, the Sellers
listed on Schedule 1 to the Receivables Sale Agreement
or any Affiliate thereof)
This certifies that
[NAME OF CERTIFICATEHOLDER]
(the "Class A Certificateholder") is the registered owner of a fractional
undivided interest in the assets of LFI Receivables Master Trust (the "Trust"),
created pursuant to the Pooling Agreement, dated as of August 5, 1996 (as
amended and restated on February 4, 1997 and as the same may from time to time
be amended, restated, supplemented or otherwise modified thereafter, the
"Pooling Agreement"), by and among LFI Receivables Corporation, a Delaware
corporation (the "Company"), LFI Servicing Corporation, a Delaware corporation,
as master servicer (the "Master Servicer"), and The Chase Manhattan Bank, a New
York banking corporation, not in its individual capacity but solely as trustee
(in such capacity, the "Trustee") for the Trust, as supplemented by the Series
1997-1 Supplement, dated as of February 4, 1997 (as amended, supplemented or
otherwise modified from time to time, the "Supplement", collectively with the
Pooling Agreement, the "Agreement"), by and among the Company, the Master
Servicer and the Trustee. The corpus of the Trust consists of receivables (the
"Receivables") representing amounts payable for goods or services and all other
Trust Assets referred to in the Agreement. Although a summary of certain
provisions of the Agreement is set forth below, this Class A Certificate does
not purport to summarize the Agreement, is qualified in its entirety by the
terms and provisions of the Agreement and reference is made to the Agreement for
information with respect to the interests, rights, benefits, obligations,
proceeds and duties evidenced hereby and the rights, duties and obligations of
the Trustee. A copy of the Agreement may
<PAGE>
4
be requested by writing to the Trustee at The Chase Manhattan Bank, 450 W. 33rd
Street, 15th Floor, New York, New York 10011, Attention: Advanced Structured
Products Group. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to them in the Agreement.
This Class A Certificate is issued under, is entitled to the
benefits of, and is subject to, the terms, provisions and conditions of the
Agreement, to which Agreement the Class A Certificateholder by virtue of the
acceptance hereof assents and is bound.
The Master Servicer, the Servicers, the Company, each Class A
Certificateholder and the Trustee intend, for federal, state and local income
and franchise tax purposes only, that the Class A Certificates be evidence of
indebtedness of the Company secured by the Trust Assets and that the Trust not
be characterized as an association or publicly traded partnership taxable as a
corporation. The Class A Certificateholder, by the acceptance hereof, agrees to
treat the Class A Certificates for federal, state and local income and franchise
tax purposes as indebtedness of the Company.
This Class A Certificate is one of a Class of Investor Certificates
entitled "LFI Receivables Master Trust, Class A Certificates, Series 1997-1"
(the "Class A Certificates"). Concurrent with the issuance of the Class A
Certificates, the Trust will issue two other Classes of Investor Certificates
entitled "LFI Receivables Master Trust, Class B Certificates, Series 1997-1"
(the "Class B Certificates") and "LFI Receivables Master Trust, Class C
Certificates, Series 1997-1" (the "Class C Certificates", and together with the
Class A Certificates and the Class B Certificates, the "Term Certificates"). The
Term Certificates represent fractional undivided interests in the Trust Assets,
consisting of the right to receive distributions specified in the Supplement out
of (i) the Series 1997-1 Invested Percentage (expressed as a decimal)
<PAGE>
5
of the Collections received with respect to the Receivables and of all other
funds on deposit in the Collection Account and (ii) to the extent such interests
appear in the Supplement, all other funds on deposit in the Series 1997-1
Collection Subaccount and any subaccounts thereof (the "Series 1997-1
Certificateholders' Interest"). Concurrent with the issuance of the Term
Certificates, the Trust shall also issue a Subordinated Company Interest to the
Company representing a fractional undivided interest in the Trust Assets,
consisting of the right to receive the distributions specified in the Supplement
out of (i) the Series 1997-1 Invested Percentage (expressed as a decimal) of
Collections received with respect to the Receivables and all other funds on
deposit in the Collection Account and (ii) to the extent such interests appear
in the Supplement, all other funds on deposit in the Series 1997-1 Collection
Subaccount and any subaccounts thereof, in each case to the extent not required
to be distributed to or for the benefit of the Term Certificateholders (the
"Series 1997-1 Subordinated Interest"). The Trust Assets are allocated in part
to the Term Certificateholders and the holders of the Series 1997-1 Subordinated
Interest with the remainder allocated to the Investor Certificateholders and the
holders of the Subordinated Company Interest of other Series and to the Company.
An Exchangeable Company Interest representing the Company's interest in the
Trust was issued to the Company pursuant to the Pooling Agreement on August 5,
1996. The Exchangeable Company Interest represents the interest in the Trust
Assets not represented by the Investor Certificates and Subordinated Company
Interest of each Outstanding Series. The Exchangeable Company Interest may be
decreased by the Company pursuant to the Pooling Agreement in exchange for an
increase in the Invested Amount of a Class of Investor Certificates of an
Outstanding Series and an increase in the related Series Subordinated Company
Interest, or one or more newly issued Series of Investor Certificates and the
related newly issued Series Subordinated Company Interest, upon the conditions
set forth in the Pooling Agreement.
<PAGE>
6
Interest on the Class A Invested Amount will be distributed to the
Class A Certificateholders on each Distribution Date. The interest payable on
each Distribution Date shall be an amount equal to the product of (i) the Class
A Certificate Rate for the related Accrual Period, (ii) the Class A Invested
Amount on the first day of such Accrual Period (after giving effect to any
distributions of principal on such date) and (iii) the actual number of days in
such Accrual Period divided by 360. Interest due but not paid on any
Distribution Date (the "Class-A Interest Shortfall") will be due on the next
Distribution Date, together with interest on such amount equal to the product,
for the Accrual Period succeeding such Accrual Period (or portion thereof) until
such Class A Interest Shortfall is paid, of (i) a rate per annum equal to the
Class A Certificate Rate for the next Accrual Period, (ii) such Class A Interest
Shortfall (or the portion thereof which has not been paid to the Class A
Certificateholders) and (iii) the actual number of days in such succeeding
Accrual Period divided by 360.
On each Distribution Date during the Series 1997-1 Amortization
Period, a Series 1997-1 Monthly Principal Payment (rounded down to the nearest
$1,000,000 unless such payment is less than $1,000,000) shall be made from
amounts deposited into the Series 1997-1 Principal Collection Sub-subaccount
during the preceding Accrual Period (after the payment of any Servicing Fees due
to the Successor Master Servicer or a Successor Servicer), first, pro rata to
the Class A Certificateholders until repayment in full of the Class A Invested
Amount on such date, second, pro rata to the Class B Certificateholders until
repayment in full of the Class B Invested Amount on such date and third, pro
rata to the Class C Certificateholders until repayment in full of the Class C
Invested Amount on such date. The Class A Invested Amount may be otherwise
reduced by distributions to the Class A Certificateholders as set forth in the
Agreement.
<PAGE>
7
Distributions with respect to this Class A Certificate shall be paid
by the Trustee or its agent in immediately available funds to the Class A
Certificateholder at the registered address of the Class A Certificateholder as
provided to the Trustee. Final payment of this Class A Certificate shall be made
after due notice of such final distribution delivered by the Trustee to the
Class A Certificateholders in accordance with the Agreement.
This Class A Certificate does not represent an obligation of, or an
interest in, the Company, the Master Servicer or any Affiliate of either of
them.
Subject to the provisions of the Agreement, the transfer of this
Class A Certificate shall be registered in the Certificate Register upon
surrender of this Class A Certificate for registration of transfer at any office
or agency maintained by the Transfer Agent and Registrar accompanied by a
written instrument of transfer, in a form satisfactory to the Trustee and the
Transfer Agent and Registrar, duly executed by the Class A Certificateholder or
the Class A Certificateholder's attorney-in-fact duly authorized in writing, and
thereupon one or more Class A Certificates of authorized denominations and of
like Fractional Undivided Interests will be issued to the designated transferee
or transferees.
The Trustee, the Company, the Paying Agent, the Transfer Agent and
Registrar and any agent of either of them, may treat the person in whose name
this Class A Certificate is registered as the owner hereof for all purposes.
It is expressly understood and agreed by the Company and the Class A
Certificateholder that (i) the Agreement is executed and delivered by the
Trustee, not individually or personally but solely as Trustee of the Trust, in
the exercise of the powers and authority conferred and vested in it, (ii) except
as set forth in the Agreement, the representations, undertakings and agreements
made on the
<PAGE>
8
part of the Trust in the Agreement are made and intended not as personal
representations, undertakings and agreements by the Trustee, but are made and
intended for the purpose of binding only the Trust, (iii) nothing herein
contained shall be construed as creating any liability of the Trustee,
individually or personally, to perform any covenant either expressed or implied
made on the part of the Trust in the Agreement, all such liability, if any,
being expressly waived by the parties who are signatories to the Agreement and
by any Person claiming by, through or under such parties; provided, however, the
Trustee shall be liable in its individual capacity for its own willful
misconduct or gross negligence and for any tax assessed against the Trustee
based on or measured by any fees, commission or compensation received by it for
acting as Trustee and (iv) under no circumstances shall the Trustee be
personally liable for the payment of any indebtedness or expenses of the Trust
or be liable for the breach or failure of any obligation, representation,
warranty or covenant made or undertaken by the Trust under the Agreement.
This Class A Certificate shall be construed in accordance with and
governed by the laws of the State of New York without reference to any conflict
of law principles.
The Class A Certificateholder hereby agrees that, prior to the date
which is one year and one day after the later of (i) the last day of the Series
1997-1 Amortization Period and (ii) the date that any Investor Certificates of
any other Outstanding Series are paid in full, 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
similar proceedings under any federal or state bankruptcy or similar law.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, by manual signature, this Class A Certificate shall
not be entitled to any benefit under the Agreement, or be valid for any purpose.
<PAGE>
9
IN WITNESS WHEREOF, the Company has caused this Class A Certificate
to be duly executed.
Dated: , 1997
LFI RECEIVABLES CORPORATION,as
authorized pursuant to
Section 5.01 of the Pooling
Agreement
by
----------------------------
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A Certificates described in the
within-mentioned Agreement.
The Chase Manhattan Bank,
not in its individual
capacity but solely as
Trustee,
By: OR By:
--------------------- ---------------------
Authorized Signatory Authenticating Agent
By:
---------------------
Authorized Signatory
<PAGE>
10
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE(S)
- --------------------------------------------------
- --------------------------------------------------
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
the within certificate and all rights thereunder, and hereby
irrevocably constitutes and appoints
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
attorney, with full power of substitution in the premises, to transfer said
certificate on the books kept for registration thereof.
The undersigned certifies that:
(check one)
[ ] The undersigned is transferring this Term Certificate to a Person
it reasonably believes is a "Qualified Institutional Buyer" (as
defined in Rule 144A under the Act) who has been informed that the
sale is being made in reliance upon Rule 144A.
[ ] The undersigned is transferring this Term Certificate in
accordance with the other provisions of the legends set forth
herein.
Dated: ________________________________
<PAGE>
11
. . . . . . . . . . . . . . . . . . . . . . .
Note: The signature(s) to this Assignment must
correspond with the name(s) as written on the face of
the within certificate in every particular, without
alteration or any change whatsoever.
<PAGE>
EXHIBIT B TO
SERIES 1997-1 SUPPLEMENT
LFI RECEIVABLES MASTER TRUST
FORM OF CLASS B CERTIFICATE, SERIES 1997-1
REGISTERED
NO. $ of
$ issued)
CUSIP No.
[For Book-Entry Certificates Only: UNLESS THIS TERM CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW
YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
INTERESTS IN THIS TERM CERTIFICATE MAY ONLY BE HELD BY QUALIFIED
INSTITUTIONAL BUYERS (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT OF
1933).]
THE CLASS B CERTIFICATES ARE SUBORDINATED IN RIGHT OF PAYMENT TO THE
CLASS A CERTIFICATES AS PROVIDED IN THE POOLING AGREEMENT AND THE SERIES 1997-1
SUPPLEMENT.
THIS TERM CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "ACT"). THE HOLDER HEREOF, BY PURCHASING THIS TERM CERTIFICATE,
AGREES THAT SUCH TERM CERTIFICATE MAY BE RESOLD, PLEDGED OR TRANSFERRED ONLY IN
ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS IN AN AMOUNT OF AT LEAST
$1,000,000 AND (1) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER
THE ACT ("RULE 144A"), TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER THAT PURCHASES
<PAGE>
2
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OR ACCOUNTS OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A OR (2) TO A PERSON WHO (A) IS AN INSTITUTIONAL
"ACCREDITED INVESTOR", WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE ACT, AND WHO DELIVERS A PURCHASER LETTER TO THE TRUSTEE
IN THE FORM ATTACHED TO THE SERIES 1997-1 SUPPLEMENT OR (B) IS TAKING DELIVERY
OF SUCH CERTIFICATE PURSUANT TO A TRANSACTION THAT IS OTHERWISE EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE ACT, AS CONFIRMED IN AN OPINION OF COUNSEL
ADDRESSED TO THE TRUSTEE AND THE COMPANY WHICH OPINION AND COUNSEL ARE
SATISFACTORY TO THE COMPANY AND THE TRUSTEE.
THIS TERM CERTIFICATE MAY NOT BE ACQUIRED OR HELD BY OR ON BEHALF OF
(1) AN "EMPLOYEE BENEFIT PLAN" WITHIN THE MEANING OF SECTION 3(3) OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR OTHER RETIREMENT
ARRANGEMENT, INDIVIDUAL RETIREMENT ACCOUNT OR KEOGH PLAN, WHETHER OR NOT IT IS
SUBJECT TO THE PROVISIONS OF TITLE I THERETO, (2) ANY PLAN DESCRIBED IN SECTION
4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") OR (3)
ANY OTHER ENTITY THAT WOULD BE DEEMED TO BE A "BENEFIT PLAN INVESTOR" WITHIN THE
MEANING OF DEPARTMENT OF LABOR REGULATIONS SECTION 2510.3-101(f)(2) (ANY OF THE
FOREGOING, AN "ERISA ENTITY").
THIS TERM CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY
GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY OTHER PERSON.
Purchasers of this Term Certificate will be deemed to have made
certain representations and warranties set forth in the Supplement.
This Class B Certificate evidences a fractional undivided interest
in the assets of the
<PAGE>
3
LFI RECEIVABLES MASTER TRUST
the corpus of which consists of receivables representing amounts payable for
goods or services, which receivables have been purchased by LFI Receivables
Corporation, a Delaware corporation, which in turn transferred and assigned such
receivables to the LFI Receivables Master Trust.
(Not an interest in or obligation of
LFI Receivables Corporation, the Sellers
listed on Schedule 1 to the Receivables Sale Agreement
or any Affiliate thereof)
This certifies that
[NAME OF CERTIFICATEHOLDER]
(the "Class B Certificateholder") is the registered owner of a fractional
undivided interest in the assets of LFI Receivables Master Trust (the "Trust"),
created pursuant to the Pooling Agreement, dated as of August 5, 1996 (as
amended and restated on February 4, 1997 and as the same may from time to time
be amended, restated, supplemented or otherwise modified thereafter, the
"Pooling Agreement"), by and among LFI Receivables Corporation, a Delaware
corporation (the "Company"), LFI Servicing Corporation, a Delaware corporation,
as master servicer (the "Master Servicer"), and The Chase Manhattan Bank, a New
York banking corporation, not in its individual capacity but solely as trustee
(in such capacity, the "Trustee") for the Trust, as supplemented by the Series
1997-1 Supplement, dated as of February 4, 1997 (as amended, supplemented or
otherwise modified from time to time, the "Supplement", collectively with the
Pooling Agreement, the "Agreement"), by and among the Company, the Master
Servicer and the Trustee. The corpus of the Trust consists of receivables (the
"Receivables") representing amounts payable for goods or services and all other
Trust Assets referred to in the Agreement. Although a summary of certain
provisions of the Agreement is set forth below, this Class B Certificate does
not purport to summarize the Agreement, is qualified in its
<PAGE>
4
entirety by the terms and provisions of the Agreement and reference is made to
the Agreement for information with respect to the interests, rights, benefits,
obligations, proceeds and duties evidenced hereby and the rights, duties and
obligations of the Trustee. A copy of the Agreement may be requested by writing
to the Trustee at The Chase Manhattan Bank, 450 W. 33rd Street, 15th Floor, New
York, New York 10011, Attention: Advanced Structured Products Group. To the
extent not defined herein, the capitalized terms used herein have the meanings
ascribed to them in the Agreement.
This Class B Certificate is issued under, is entitled to the
benefits of, and is subject to, the terms, provisions and conditions of the
Agreement, to which Agreement the Class B Certificateholder by virtue of the
acceptance hereof assents and is bound.
The Master Servicer, the Servicers, the Company, each Class B
Certificateholder and the Trustee intend, for federal, state and local income
and franchise tax purposes only, that the Class B Certificates be evidence of
indebtedness of the Company secured by the Trust Assets and that the Trust not
be characterized as an association or publicly traded partnership taxable as a
corporation. The Class B Certificateholder, by the acceptance hereof, agrees to
treat the Class B Certificates for federal, state and local income and franchise
tax purposes as indebtedness of the Company.
This Class B Certificate is one of a Class of Investor Certificates
entitled "LFI Receivables Master Trust, Class B Certificates, Series 1997-1"
(the "Class B Certificates"). Concurrent with the issuance of the Class B
Certificates, the Trust will issue two other Classes of Investor Certificates
entitled "LFI Receivables Master Trust, Class A Certificates, Series 1997-1"
(the "Class A Certificates") and "LFI Receivables Master Trust, Class C
Certificates, Series 1997-1" (the "Class C Certificates", and together with the
Class A Certificates and the Class B
<PAGE>
5
Certificates, the "Term Certificates"). The Term Certificates represent
fractional undivided interests in the Trust Assets, consisting of the right to
receive distributions specified in the Supplement out of (i) the Series 1997-1
Invested Percentage (expressed as a decimal) of the Collections received with
respect to the Receivables and of all other funds on deposit in the Collection
Account and (ii) to the extent such interests appear in the Supplement, all
other funds on deposit in the Series 1997-1 Collection Subaccount and any
subaccounts thereof (the "Series 1997-1 Certificateholders' Interest").
Concurrent with the issuance of the Term Certificates, the Trust shall also
issue a Subordinated Company Interest to the Company representing a fractional
undivided interest in the Trust Assets, consisting of the right to receive the
distributions specified in the Supplement out of (i) the Series 1997-1 Invested
Percentage (expressed as a decimal) of Collections received with respect to the
Receivables and all other funds on deposit in the Collection Account and (ii) to
the extent such interests appear in the Supplement, all other funds on deposit
in the Series 1997-1 Collection Subaccount and any subaccounts thereof, in each
case to the extent not required to be distributed to or for the benefit of the
Term Certificateholders (the "Series 1997-1 Subordinated Interest"). The Trust
Assets are allocated in part to the Term Certificateholders and the holders of
the Series 1997-1 Subordinated Interest with the remainder allocated to the
Investor Certificateholders and the holders of the Subordinated Company Interest
of other Series and to the Company. An Exchangeable Company Interest
representing the Company's interest in the Trust was issued to the Company
pursuant to the Pooling Agreement on August 5, 1996. The Exchangeable Company
Interest represents the interest in the Trust Assets not represented by the
Investor Certificates and Subordinated Company Interest of each Outstanding
Series. The Exchangeable Company Interest may be decreased by the Company
pursuant to the Pooling Agreement in exchange for an increase in the Invested
Amount of a Class of Investor Certificates of an Outstanding Series and an
increase in the related Series Subordinated Company
<PAGE>
6
Interest, or one or more newly issued Series of Investor Certificates and the
related newly issued Series Subordinated Company Interest, upon the conditions
set forth in the Pooling Agreement.
Interest on the Class B Invested Amount will be distributed to the
Class B Certificateholders on each Distribution Date. The interest payable on
each Distribution Date shall be an amount equal to the product of (i) the Class
B Certificate Rate for the related Accrual Period, (ii) the Class B Invested
Amount on the first day of such Accrual Period (after giving effect to any
distributions of principal on such date) and (iii) the actual number of days in
such Accrual Period divided by 360. Interest due but not paid on any
Distribution Date (the "Class B Interest Shortfall") will be due on the next
Distribution Date, together with interest on such amount equal to the product,
for the Accrual Period succeeding such Accrual Period (or portion thereof) until
such Class B Interest Shortfall is paid, of (i) a rate per annum equal to the
Class B Certificate Rate for the next Accrual Period, (ii) such Class B Interest
Shortfall (or the portion thereof which has not been paid to the Class B
Certificateholders) and (iii) the actual number of days in such succeeding
Accrual Period divided by 360.
On each Distribution Date during the Series 1997-1 Amortization
Period, a Series 1997-1 Monthly Principal Payment (rounded down to the nearest
$1,000,000 unless such payment is less than $1,000,000) shall be made from
amounts deposited into the Series 1997-1 Principal Collection Sub- subaccount
during the preceding Accrual Period (after the payment of any Servicing Fees due
to the Successor Master Servicer or a Successor Servicer), first, pro rata to
the Class A Certificateholders until repayment in full of the Class A Invested
Amount on such date, second, pro rata to the Class B Certificateholders until
repayment in full of the Class B Invested Amount on such date and, third, pro
rata to the Class C Certificateholders until repayment in full of the Class C
Invested Amount on such date. The
<PAGE>
7
Class B Invested Amount may be otherwise reduced by distributions to the Class B
Certificateholders as set forth in the Agreement.
Distributions with respect to this Class B Certificate shall be paid
by the Trustee or its agent in immediately available funds to the Class B
Certificateholder at the registered address of the Class B Certificateholder as
provided to the Trustee. Final payment of this Class B Certificate shall be made
after due notice of such final distribution delivered by the Trustee to the
Class B Certificateholders in accordance with the Agreement.
This Class B Certificate does not represent an obligation of, or an
interest in, the Company, the Master Servicer or any Affiliate of either of
them.
Subject to the provisions of the Agreement, the transfer of this
Class B Certificate shall be registered in the Certificate Register upon
surrender of this Class B Certificate for registration of transfer at any office
or agency maintained by the Transfer Agent and Registrar accompanied by a
written instrument of transfer, in a form satisfactory to the Trustee and the
Transfer Agent and Registrar, duly executed by the Class B Certificateholder or
the Class B Certificateholder's attorney-in-fact duly authorized in writing, and
thereupon one or more Class B Certificates of authorized denominations and of
like Fractional Undivided Interests will be issued to the designated transferee
or transferees.
The Trustee, the Company, the Paying Agent, the Transfer Agent and
Registrar and any agent of either of them, may treat the person in whose name
this Class B Certificate is registered as the owner hereof for all purposes.
It is expressly understood and agreed by the Company and the Class B
Certificateholder that (i) the Agreement is executed and delivered by the
Trustee, not
<PAGE>
8
individually or personally but solely as Trustee of the Trust, in the exercise
of the powers and authority conferred and vested in it, (ii) except as set forth
in the Agreement, the representations, undertakings and agreements made on the
part of the Trust in the Agreement are made and intended not as personal
representations, undertakings and agreements by the Trustee, but are made and
intended for the purpose of binding only the Trust, (iii) nothing herein
contained shall be construed as creating any liability of the Trustee,
individually or personally, to perform any covenant either expressed or implied
made on the part of the Trust in the Agreement, all such liability, if any,
being expressly waived by the parties who are signatories to the Agreement and
by any Person claiming by, through or under such parties; provided, however, the
Trustee shall be liable in its individual capacity for its own willful
misconduct or gross negligence and for any tax assessed against the Trustee
based on or measured by any fees, commission or compensation received by it for
acting as Trustee and (iv) under no circumstances shall the Trustee be
personally liable for the payment of any indebtedness or expenses of the Trust
or be liable for the breach or failure of any obligation, representation,
warranty or covenant made or undertaken by the Trust under the Agreement.
This Class B Certificate shall be construed in accordance with and
governed by the laws of the State of New York without reference to any conflict
of law principles.
The Class B Certificateholder hereby agrees that, prior to the date
which is one year and one day after the later of (i) the last day of the Series
1997-1 Amortization Period and (ii) the date that any Investor Certificates of
any other Outstanding Series are paid in full, 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
similar proceedings under any federal or state bankruptcy or similar law.
<PAGE>
9
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, by manual signature, this Class B Certificate shall
not be entitled to any benefit under the Agreement, or be valid for any purpose.
IN WITNESS WHEREOF, the Company has caused this Class B Certificate
to be duly executed.
Dated: _________, 1997
LFI RECEIVABLES CORPORATION,as
authorized pursuant to
Section 5.01 of the Pooling
Agreement
by ___________________________________
Title:
<PAGE>
10
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class B Certificates described in the
within-mentioned Agreement.
The Chase Manhattan Bank,
not in its individual
capacity but solely as
Trustee,
By: _________________________ OR By: ________________________________
Authorized Signatory Authenticating Agent
By: ________________________________
Authorized Signatory
<PAGE>
11
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE(S)
- --------------------------------------
- --------------------------------------
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
the within certificate and all rights thereunder, and hereby irrevocably
constitutes and appoints
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
attorney, with full power of substitution in the premises, to transfer said
certificate on the books kept for registration thereof.
The undersigned certifies that:
(check one)
[ ] The undersigned is transferring this Term Certificate to a Person
it reasonably believes is a "Qualified Institutional Buyer" (as
defined in Rule 144A under the Act) who has been informed that the
sale is being made in reliance upon Rule 144A.
[ ] The undersigned is transferring this Term Certificate in
accordance with the other provisions of the legends set forth
herein.
Dated: ______________________
<PAGE>
12
. . . . . . . . . . . . . . . .
Note: The signature(s) to this Assignment must
correspond with the name(s) as written on the
face of the within certificate in every
particular, without alteration or any change
whatsoever.
<PAGE>
EXHIBIT C TO
SERIES 1997-1 SUPPLEMENT
LFI RECEIVABLES MASTER TRUST
FORM OF CLASS C CERTIFICATE, SERIES 1997-1
REGISTERED NO. $_________ (of
_____ $___________ issued)
CUSIP No.
THE CLASS C CERTIFICATES MAY NOT BE SOLD, ASSIGNED, PLEDGED OR
OTHERWISE TRANSFERRED UNLESS THE TRANSFEREE THEREOF DELIVERS A LETTER, IN THE
FORM ATTACHED TO THE SERIES 1997-1 SUPPLEMENT, TO THE EFFECT THAT (I) SUCH
TRANSFEREE IS ACQUIRING SUCH CLASS C CERTIFICATES FOR ITS OWN ACCOUNT, IS THE
SOLE BENEFICIAL OWNER OF SUCH CLASS C CERTIFICATES AND WILL REMAIN THE SOLE
BENEFICIAL OWNER OF SUCH CLASS C CERTIFICATES UNTIL SUCH CLASS C CERTIFICATES
ARE TRANSFERRED AS PROVIDED IN THE SERIES 1997-1 SUPPLEMENT, (II) (A) SUCH
TRANSFEREE IS NOT, FOR U.S. FEDERAL INCOME TAX PURPOSES, A TRUST, ESTATE,
PARTNERSHIP OR "S CORPORATION" (AS DEFINED IN SECTION 1361(a)(1) OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE")) OR (B) SUCH TRANSFEREE IS A
TRUST, ESTATE, PARTNERSHIP OR "S CORPORATION" (AS DEFINED IN SECTION 1361(a)(1)
OF THE CODE) FOR U.S. FEDERAL INCOME TAX PURPOSES, BUT AFTER GIVING EFFECT TO
SUCH TRANSFER OF CLASS C CERTIFICATES TO SUCH TRANSFEREE, LESS THAN 50 PERCENT
OF THE AGGREGATE VALUE OF SUCH TRANSFEREE'S ASSETS WOULD CONSIST OF CLASS C
CERTIFICATES AND (III) SUCH CLASS C CERTIFICATES HAVE NOT BEEN TRANSFERRED
THROUGH AN "ESTABLISHED SECURITIES MARKET" WITHIN THE MEANING OF SECTION 7704(b)
OF THE CODE.
THE CLASS C CERTIFICATES ARE SUBORDINATED IN RIGHT OF PAYMENT TO THE
CLASS A CERTIFICATES AND THE CLASS B CERTIFICATES AS PROVIDED IN THE POOLING
AGREEMENT AND THE SERIES 1997-1 SUPPLEMENT.
PURSUANT TO THE SERIES 1997-1 SUPPLEMENT, THE TRUSTEE WILL BE
REQUIRED TO WITHHOLD PURSUANT TO SECTION
<PAGE>
2
1446 OF THE CODE ON PAYMENTS OF INTEREST ALLOCABLE TO CLASS C CERTIFICATEHOLDERS
WHO ARE FOREIGN INVESTORS UNLESS SUCH CLASS C CERTIFICATEHOLDERS PROVIDE THE
TRUSTEE WITH (I) A PROPERLY EXECUTED IRS FORM 4224 (OR SUCCESSOR FORM) AND (II)
UPON REQUEST BY THE TRUSTEE AND IN A FORM ACCEPTABLE TO THE TRUSTEE, EVIDENCE
DOCUMENTING THE INCLUSION IN GROSS INCOME OF, AND THE PAYMENT OF APPROPRIATE
U.S. TAXES, IF ANY, ON THAT PORTION OF THE TRUST'S NET INCOME ALLOCABLE TO SUCH
CLASS C CERTIFICATEHOLDERS. IF THE TRUSTEE DOES WITHHOLD ON A FOREIGN INVESTOR
PURSUANT TO SECTION 1446 OF THE CODE, THE CASH RECEIVED ON A CURRENT BASIS BY
FOREIGN INVESTORS WHO OWN CLASS C CERTIFICATES WILL BE LESS THAN THE FULL
INTEREST PAYMENTS. FOR THESE PURPOSES, A FOREIGN INVESTOR IS A PERSON OR ENTITY
OTHER THAN AN INDIVIDUAL WHO IS A CITIZEN OR RESIDENT OF THE UNITED STATES, A
CORPORATION, PARTNERSHIP OR OTHER ENTITY CREATED OR ORGANIZED IN OR UNDER THE
LAWS OF THE UNITED STATES OR ANY POLITICAL SUBDIVISION THEREOF (A "U.S.
COMPANY"), OR AN ESTATE OR TRUST THE INCOME OF WHICH IS SUBJECT TO U.S. FEDERAL
INCOME TAXATION REGARDLESS OF ITS SOURCE. A U.S. COMPANY WHICH IS A SUBSIDIARY
OF A FOREIGN INVESTOR IS NOT ITSELF CONSIDERED A FOREIGN INVESTOR BUT A U.S.
BRANCH OF A FOREIGN INVESTOR WOULD BE CONSIDERED A FOREIGN INVESTOR.
THIS TERM CERTIFICATE MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY TO A PERSON TAKING DELIVERY WITH RESPECT TO ANY SUCH RESALE,
PLEDGE OR TRANSFER OF A DEFINITIVE CERTIFICATE WHO DELIVERS A CLASS C TRANSFEREE
TAX LETTER TO THE TRUSTEE IN THE FORM ATTACHED TO THE SERIES 1997-1 SUPPLEMENT.
THIS TERM CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "ACT"). THE HOLDER HEREOF, BY PURCHASING THIS TERM CERTIFICATE,
AGREES THAT SUCH TERM CERTIFICATE MAY BE RESOLD, PLEDGED OR TRANSFERRED ONLY IN
ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS IN AN AMOUNT OF AT LEAST
$1,000,000 AND (1) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER
THE ACT ("RULE 144A"), TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER THAT PURCHASES FOR ITS OWN
<PAGE>
3
ACCOUNT OR FOR THE ACCOUNT OR ACCOUNTS OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A OR (2) TO A PERSON WHO (A) IS AN INSTITUTIONAL "ACCREDITED
INVESTOR", WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D
UNDER THE ACT, AND WHO DELIVERS A PURCHASER LETTER TO THE TRUSTEE IN THE FORM
ATTACHED TO THE SERIES 1997-1 SUPPLEMENT OR (B) IS TAKING DELIVERY OF SUCH
CERTIFICATE PURSUANT TO A TRANSACTION THAT IS OTHERWISE EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE ACT, AS CONFIRMED IN AN OPINION OF COUNSEL
ADDRESSED TO THE TRUSTEE AND THE COMPANY, WHICH COUNSEL AND OPINION ARE
SATISFACTORY TO THE COMPANY AND THE TRUSTEE.
THIS TERM CERTIFICATE MAY NOT BE ACQUIRED OR HELD BY OR ON BEHALF OF
(1) AN "EMPLOYEE BENEFIT PLAN" WITHIN THE MEANING OF SECTION 3(3) OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR OTHER RETIREMENT
ARRANGEMENT, INDIVIDUAL RETIREMENT ACCOUNT OR KEOGH PLAN, WHETHER OR NOT IT IS
SUBJECT TO THE PROVISIONS OF TITLE I THERETO, (2) ANY PLAN DESCRIBED IN SECTION
4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") OR (3)
ANY OTHER ENTITY THAT WOULD BE DEEMED TO BE A "BENEFIT PLAN INVESTOR" WITHIN THE
MEANING OF DEPARTMENT OF LABOR REGULATIONS SECTION 2510.3-101(f)(2) (ANY OF THE
FOREGOING, AN "ERISA ENTITY").
THIS TERM CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY
GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY OTHER PERSON.
Purchasers of this Term Certificate will be deemed to have made
certain representations and warranties set forth in the Supplement.
This Class C Certificate evidences a fractional undivided interest
in the assets of the
LFI RECEIVABLES MASTER TRUST
<PAGE>
4
the corpus of which consists of receivables representing amounts payable for
goods or services, which receivables have been purchased by LFI Receivables
Corporation, a Delaware corporation, which in turn transferred and assigned such
receivables to the LFI Receivables Master Trust.
(Not an interest in or obligation of
LFI Receivables Corporation, the Sellers listed on
Schedule 1 to the Receivables Sale Agreement
or any Affiliate thereof)
This certifies that
[NAME OF CERTIFICATEHOLDER]
(the "Class C Certificateholder") is the registered owner of a fractional
undivided interest in the assets of LFI Receivables Master Trust (the "Trust"),
created pursuant to the Pooling Agreement, dated as of August 5, 1996 (as
amended and restated on February 4, 1997 and as the same may from time to time
be amended, restated, supplemented or otherwise modified thereafter, the
"Pooling Agreement"), by and among LFI Receivables Corporation, a Delaware
corporation (the "Company"), LFI Servicing Corporation, a Delaware corporation,
as master servicer (the "Master Servicer"), and The Chase Manhattan Bank, a New
York banking corporation, not in its individual capacity but solely as trustee
(in such capacity, the "Trustee") for the Trust, as supplemented by the Series
1997-1 Supplement, dated as of February 4, 1997 (as amended, supplemented or
otherwise modified from time to time, the "Supplement", collectively, with the
Pooling Agreement, the "Agreement"), by and among the Company, the Master
Servicer and the Trustee. The corpus of the Trust consists of receivables (the
"Receivables") representing amounts payable for goods or services and all other
Trust Assets referred to in the Agreement. Although a summary of certain
provisions of the Agreement is set forth below, this Class C Certificate does
not purport to summarize the Agreement, is qualified in its
<PAGE>
5
entirety by the terms and provisions of the Agreement and reference is made to
the Agreement for information with respect to the interests, rights, benefits,
obligations, proceeds and duties evidenced hereby and the rights, duties and
obligations of the Trustee. A copy of the Agreement may be requested by writing
to the Trustee at The Chase Manhattan Bank, 450 W. 33rd Street, New York, New
York 10011, Attention: Advanced Structured Products Group. To the extent not
defined herein, the capitalized terms used herein have the meanings ascribed to
them in the Agreement.
This Class C Certificate is issued under, is entitled to the
benefits of, and is subject to, the terms, provisions and conditions of the
Agreement, to which Agreement the Class C Certificateholder by virtue of the
acceptance hereof assents and is bound.
The Master Servicer, the Servicers, the Company, each Class C
Certificateholder and the Trustee intend, for federal, state and local income
and franchise tax purposes only, that the Class C Certificates be evidence of
indebtedness of the Company secured by the Trust Assets and that the Trust not
be characterized as an association or publicly traded partnership taxable as a
corporation. The Class C Certificateholder, by the acceptance hereof, agrees to
treat the Class C Certificates for federal, state and local income and franchise
tax purposes as indebtedness of the Company.
This Class C Certificate is one of a Class of Investor Certificates
entitled "LFI Receivables Master Trust, Class C Certificates, Series 1997-1"
(the "Class C Certificates"). Concurrent with the issuance of the Class C
Certificates, the Trust will issue two other Classes of Investor Certificates
entitled "LFI Receivables Master Trust, Class A Certificates, Series 1997-1"
(the "Class A Certificates") and "LFI Receivables Master Trust, Class B
Certificates" (the "Class B Certificates", and together with the Class A
Certificates and the Class C Certificates, the "Term Certificates"). The Term
Certificates represent
<PAGE>
6
fractional undivided interests in the Trust Assets, consisting of the right to
receive distributions specified in the Supplement out of (i) the Series 1997-1
Invested Percentage (expressed as a decimal) of the Collections received with
respect to the Receivables and of all other funds on deposit in the Collection
Account and (ii) to the extent such interests appear in the Supplement, all
other funds on deposit in the Series 1997-1 Collection Subaccount and any
subaccounts thereof (the "Series 1997-1 Certificateholders' Interest").
Concurrent with the issuance of the Term Certificates, the Trust shall also
issue a Subordinated Company Interest to the Company representing a fractional
undivided interest in the Trust Assets, consisting of the right to receive the
distributions specified in the Supplement out of (i) the Series 1997-1 Invested
Percentage (expressed as a decimal) of Collections received with respect to the
Receivable and all other funds on deposit in the Collection Account and (ii) to
the extent such interests appear in the Supplement, all other funds on deposit
in the Series 1997-1 Collection Subaccount and any subaccounts thereof, in each
case to the extent not required to be distributed to or for the benefit of the
Term Certificateholders (the "Series 1997-1 Subordinated Interest"). The Trust
Assets are allocated in part to the Term Certificateholders and the holder of
the Series 1997-1 Subordinated Interest with the remainder allocated to the
Investor Certificateholders and the holders of the Subordinated Company Interest
of other Series and to the Company. An Exchangeable Company Interest
representing the Company's interest in the Trust was issued pursuant to the
Pooling Agreement on August 5, 1996. The Exchangeable Company Interest
represents the interest in the Trust Assets not represented by the Investor
Certificates or Subordinated Company Interest of each Outstanding Series. The
Exchangeable Company Interest may be decreased by the Company pursuant to the
Pooling Agreement in exchange for an increase in the Invested Amount of a Class
of Investor Certificates of an Outstanding Series and an increase in the related
Series Subordinated Company Interest, or one or more newly issued Series of
Investor Certificates and the related
<PAGE>
7
newly issued Series Subordinated Company Interest, upon the conditions set forth
in the Pooling Agreement.
Interest on the Class C Invested Amount will be distributed to the
Class C Certificateholders on each Distribution Date. The interest payable on
each Distribution Date shall be an amount equal to the product of (i) the Class
C Certificate Rate for the related Accrual Period, (ii) the Class C Invested
Amount on the first day of such Accrual Period (after giving effect to any
distributions of principal on such date) and (iii) the actual number of days in
such Accrual Period divided by 360. Interest due but not paid on any
Distribution Date (the "Class C Interest Shortfall") will be due on the next
Distribution Date, together with interest on such amount equal to the product,
for the Accrual Period succeeding such Accrual Period (or portion thereof) until
such Class C Interest Shortfall is paid, of (i) a rate per annum equal to the
Class C Certificate Rate for the next Accrual Period, (ii) such Class C Interest
Shortfall (or the portion thereof which has not been paid to the Class C
Certificateholders) and (iii) the actual number of days in such succeeding
Accrual Period divided by 360.
On each Distribution Date during the Series 1997-1 Amortization
Period, a Series 1997-1 Monthly Principal Payment (rounded down to the nearest
$1,000,000 unless such payment is less than $1,000,000) shall be made from
amounts deposited into the Series 1997-1 Principal Collection Sub- subaccount
during the preceding Accrual Period (after the payment of any Servicing Fees due
to the Successor Master Servicer or a Successor Servicer), first, pro rata to
the Class A Certificateholders until repayment in full of the Class A Invested
Amount on such date, second, pro rata to the Class B Certificateholders until
repayment in full of the Class B Invested Amount on such date and, third, pro
rata to the Class C Certificateholders until repayment in full of the Class C
Invested Amount on such date. The Class C Invested Amount may be otherwise
reduced by
<PAGE>
8
distributions to the Class C Certificateholders as set forth in the Agreement.
Distributions with respect to this Class C Certificate shall be paid
by the Trustee or its agent in immediately available funds to the Class C
Certificateholder at the registered address of the Class C Certificateholder as
provided to the Trustee. Final payment of this Class C Certificate shall be made
after due notice of such final distribution delivered by the Trustee to the
Class C Certificateholders in accordance with the Agreement.
This Class C Certificate does not represent an obligation of, or an
interest in, the Company, the Master Servicer or any Affiliate of either of
them.
Subject to the provisions of the Agreement, the transfer of this
Class C Certificate shall be registered in the Certificate Register upon
surrender of this Class C Certificate for registration of transfer at any office
or agency maintained by the Transfer Agent and Registrar accompanied by a
written instrument of transfer, in a form satisfactory to the Trustee and the
Transfer Agent and Registrar, duly executed by the Class C Certificateholder or
the Class C Certificateholder's attorney-in-fact duly authorized in writing, and
thereupon one or more Class C Certificates of authorized denominations and of
like Fractional Undivided Interests will be issued to the designated transferee
or transferees.
The Trustee, the Company, the Paying Agent, the Transfer Agent and
Registrar and any agent of either of them, may treat the person in whose name
this Class C Certificate is registered as the owner hereof for all purposes.
It is expressly understood and agreed by the Company and the Class C
Certificateholder that (i) the Agreement is executed and delivered by the
Trustee, not individually or personally but solely as Trustee of the
<PAGE>
9
Trust, in the exercise of the powers and authority conferred and vested in it,
(ii) except as set forth in the Agreement, the representations, undertakings and
agreements made on the part of the Trust in the Agreement are made and intended
not as personal representations, undertakings and agreements by the Trustee, but
are made and intended for the purpose of binding only the Trust, (iii) nothing
herein contained shall be construed as creating any liability of the Trustee,
individually or personally, to perform any covenant either expressed or implied
made on the part of the Trust in the Agreement, all such liability, if any,
being expressly waived by the parties who are signatories to the Agreement and
by any Person claiming by, through or under such parties; provided, however, the
Trustee shall be liable in its individual capacity for its own willful
misconduct or gross negligence and for any tax assessed against the Trustee
based on or measured by any fees, commission or compensation received by it for
acting as Trustee and (iv) under no circumstances shall the Trustee be
personally liable for the payment of any indebtedness or expenses of the Trust
or be liable for the breach or failure of any obligation, representation,
warranty or covenant made or undertaken by the Trust under the Agreement.
This Class C Certificate shall be construed in accordance with and
governed by the laws of the State of New York without reference to any conflict
of law principles.
The Class C Certificateholder hereby agrees that, prior to the date
which is one year and one day after the later of (i) the last day of the Series
1997-1 Amortization Period and (ii) the date that any Investor Certificates of
any other Outstanding Series are repaid in full, 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
similar proceedings under any federal or state bankruptcy or similar law.
<PAGE>
10
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, by manual signature, this Class C Certificate shall
not be entitled to any benefit under the Agreement, or be valid for any purpose.
IN WITNESS WHEREOF, the Company has caused this Class C Certificate
to be duly executed.
Dated: ______________, 1997
LFI RECEIVABLES CORPORATION,
as authorized pursuant to
Section 5.01 of the Pooling
Agreement
By:__________________________________
Title:
<PAGE>
11
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class C Certificates described in the
within-mentioned Agreement.
The Chase Manhattan Bank,
not in its individual
capacity but solely as
Trustee
By: _________________________ OR By: ________________________________
Authorized Officer Authenticating Agent
By: ________________________________
Authorized Officer
<PAGE>
12
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE(S)
- --------------------------------------
- --------------------------------------
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
the within certificate and all rights thereunder, and hereby irrevocably
constitutes and appoints
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
attorney, with full power of substitution in the premises, to transfer said
certificate on the books kept for registration thereof.
The undersigned certifies that:
(check one)
[ ] The undersigned is transferring this Term Certificate to a Person
it reasonably believes is a "Qualified Institutional Buyer" (as
defined in Rule 144A under the Act) who has been informed that the
sale is being made in reliance upon Rule 144A.
[ ] The undersigned is transferring this Term Certificate in
accordance with the other provisions of the legends set forth
herein.
Dated: __________________________
<PAGE>
13
. . . . . . . . . . . . . . . .
Note: The signature(s) to this Assignment must
correspond with the name(s) as written on the
face of the within certificate in every
particular, without alteration or any change
whatsoever.
<PAGE>
EXHIBIT F TO
SERIES 1997-1 SUPPLEMENT
FORM OF PURCHASER LETTER TO BE DELIVERED
BY INSTITUTIONAL ACCREDITED INVESTORS
We are delivering this letter in connection with the transfer of $
of the [Class A Certificates, Series 1997-1] [Class B Certificates, Series
1997-1] [Class C Certificates, Series 1997-1] (the "Certificates") issued by the
LFI Receivables Master Trust (the "Trust") created under the Pooling Agreement,
dated as of August 5, 1996 among LFI Receivables Corporation, a Delaware
corporation (the "Company"), LFI Servicing Corporation, a Delaware corporation,
as master servicer (the "Master Servicer"), and The Chase Manhattan Bank, a New
York banking corporation, as trustee (the "Trustee") (as amended and restated on
February 4, 1997, and as amended, supplemented or otherwise modified from time
to time thereafter, the "Pooling Agreement") and the Series 1997-1 Supplement,
dated as of February 4, 1997 (as amended, supplemented or otherwise modified
from time to time, the "Series 1997-1 Supplement"), to the Pooling Agreement
among the Company, the Master Servicer and the Trustee. Capitalized terms used
herein without definition shall have the meanings given to them in the Pooling
Agreement or the Series 1997-1 Supplement.
We hereby confirm that:
(i) we are an institutional "accredited investor" (an "Institutional
Accredited Investor"), within the meaning of Rule 501(a)(1), (2), (3) or
(7) of Regulation D under the Securities Act of 1933 (the "Securities
Act");
(ii) we are purchasing the Certificates for our own account or for
the account of one or more other Institutional Accredited Investors;
<PAGE>
2
(iii) we are taking delivery of Certificates in an amount of at
least U.S. $1,000,000 for our own account or for each separate account for
which we are acting;
(iv) we have such knowledge and experience in financial and business
matters, we are capable of evaluating the merits and risks of purchasing
Certificates and we, or the account for which we are purchasing
Certificates, can bear the economic risks of investing in the Certificates
for an indefinite period of time; and
(v) we are acquiring Certificates for investment and not with a view
to any distribution thereof in a transaction that would violate the
Securities Act or the securities laws of any state of the United States or
any other applicable jurisdiction; provided that the disposition of our
property and the property of any accounts for which we are acting as
fiduciary shall remain at all times within our control.
We understand that the Certificates are being offered in a
transaction not involving any public offering within the meaning of the
Securities Act and that the Certificates have not been registered under the
Securities Act, and we agree, on our own behalf and on behalf of each account
for which we acquire any Certificates, that such Certificates may be resold,
pledged or transferred only in accordance with any applicable state securities
laws and the restrictions set forth in the Pooling Agreement and the Series
1997-1 Supplement in amounts of at least U.S. $1,000,000 each and (i) in a
transaction meeting the requirements of Rule 144A ("Rule 144A") under the
Securities Act, to a person who we reasonably believe is a "qualified
institutional buyer" (as defined in Rule 144A) that purchases for its own
account or for the account or accounts of a qualified institutional buyer to
whom notice is given that the resale, pledge or other transfer is being made in
reliance on Rule 144A or (ii) to a person who (A) is an Institutional Accredited
Investor and delivers a Purchaser
<PAGE>
3
Letter, in substantially the form of this letter or (B) is taking delivery of
such Certificates pursuant to a transaction that is otherwise exempt from the
registration requirements of the Securities Act, as confirmed in an opinion of
counsel addressed to the Trustee and the Company, which opinion and counsel are
satisfactory to the Trustee and the Company.
We understand that the Transfer Agent and Registrar will not be
required to accept for registration of transfer any Certificates, except upon
presentation of evidence satisfactory to the Company that the foregoing
restrictions on transfer have been complied with. We further understand that any
Certificates purchased by us will be in the form of definitive physical
certificates and that such Certificates will bear a legend reflecting the
substance of the foregoing restrictions on transfer.
We acknowledge that the Transfer Agent and Registrar and the Company
will rely upon our confirmation, acknowledgments and agreements set forth
herein.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ANY CONFLICT OF LAW
PRINCIPLES.
NAME OF PURCHASER,
by _________________________________
Name:
Title:
Address:
<PAGE>
EXHIBIT G TO THE
SERIES 1997-1 SUPPLEMENT
FORM OF CLASS C TRANSFEREE TAX LETTER TO BE DELIVERED
IN CONNECTION WITH TRANSFERS OF CLASS C CERTIFICATES
[Name of Transferee] ("Transferee") is delivering this letter in
connection with a transfer of $____________ of the Class C Certificates, Series
1997-1 (the "Class C Certificates") issued by the LFI Receivables Master Trust
(the "Trust") created under the Pooling Agreement, dated as of August 5, 1996
among LFI Receivables Corporation, a Delaware corporation (the "Company"), LFI
Servicing Corporation, a Delaware corporation, as master servicer (the "Master
Servicer"), and The Chase Manhattan Bank, a New York banking corporation, as
trustee (the "Trustee") (as amended and restated on February 4, 1997, and as
amended, supplemented or otherwise modified from time to time, the "Pooling
Agreement"), and the Series 1997-1 Supplement, dated as of February 4, 1997 (as
amended, supplemented or otherwise modified from time to time, the "Series
1997-1 Supplement"), to the Pooling Agreement among the Company, the Master
Servicer and the Trustee. Capitalized terms used herein without definition shall
have the meanings given to them in the Pooling Agreement and the Series 1997-1
Supplement.
Transferee hereby represents and warrants that:
(i) Transferee has acquired $__________ of Class C Certificates from
[Name of Transferor] ("Transferor") on __________ __, ______ for its own
account, Transferee is the sole beneficial owner of such Class C
Certificates and Transferee will remain the sole beneficial owner of such
Class C Certificates until such Class C Certificates are transferred
pursuant to the Pooling Agreement and the Series 1997-1 Supplement;
(ii) Transferee is not an ERISA Entity and it is not acquiring or
holding any Class C Certificates, directly or indirectly, for or on behalf
of an ERISA Entity;
<PAGE>
2
(iii) Transferee is not a partnership, trust, estate or "S
Corporation" (within the meaning of Section 1361(a)(i) of the Internal
Revenue Code of 1986, as amended (the "Code")) for United States federal
income tax purposes or Transferee is, for United States federal income tax
purposes a partnership, trust, estate or "S Corporation" (within the
meaning of Section 1361(a)(i) of the Code, but after giving effect to the
transfer of such Class C Certificates to the Transferee, less than 50
percent of the aggregate value of Transferee's assets would consist of
Class C Certificates;
(iv) Transferee did not purchase the Class C Certificates described
herein through an "established securities exchange" within the meaning of
Section 7704(b) of the Code;
(v) [Please check appropriate option[s]]
___ Transferee is (a) an individual who is a citizen of the
United States, (b) a corporation, partnership or other entity
created or organized in or under the laws of the United States
or any political subdivision thereof, or (c) an estate or trust
the income of which is subject to U.S. federal income taxation
regardless of its source; or
___ Transferee is not (a) an individual who is a citizen of the
United States, (b) a corporation, partnership or other entity
created or organized in or under the laws of the United States
or any political subdivision thereof, or (c) an estate or trust
the income of which is subject to U.S. federal income taxation
regardless of its source.
___ If Transferee checked the immediately preceding box, then
Transferee will provide the
<PAGE>
3
Trustee with (i) a properly executed IRS Form 4224 (or successor
form) and (ii) upon request by the Trustee and in a form
acceptable to the Trustee, evidence documenting the inclusion in
gross income of, and the payment of appropriate U.S. taxes, if
any, on that portion of the Trust's net income allocable to
Transferee; and
(vi) Transferee will not transfer the Class C Certificates described
herein to any person, except as permitted by the legends set forth on the
Class C Certificates.
In addition, by signing this Class C Transferee Tax Letter, Transferee
hereby acknowledges that the Transfer Agent and Registrar may refuse to register
Transferor's transfer of the Class C Certificates described herein to Transferee
and, consequently, such sale shall not be effective, if (x) the Company has
notified the Transfer Agent and Registrar that the Company either knows, or has
a reasonable, good faith belief, that either any required representation has not
been made or that any representation made herein was untrue or inaccurate as of
the date made and (y) the Transfer Agent and Registrar properly
<PAGE>
4
notifies Transferor and Transferee of its refusal to record such transfer of the
Class C Certificates within the time allowed for providing such notification.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ANY CONFLICT OF LAW
PRINCIPLES.
------------------------------
(Name of Transferee)
By:___________________________
Name:
Title:
Address:
<PAGE>
Schedule 1 to the
Series 1997-1 Supplement
Trust Accounts
Account Account Number
------- --------------
Series 1997-1 Collection Subaccount
Series 1997-1 Principal Collection Sub-
subaccount
Series 1997-1 Non-Principal Collection
Sub-subaccount
Series 1997-1 Accrued Interest Sub-
subaccount
<PAGE>
Exhibit 10.9
================================================================================
LFI RECEIVABLES MASTER TRUST
SERIES 1997-2 SUPPLEMENT
Dated as of February 4, 1997
to
AMENDED AND RESTATED
POOLING AGREEMENT
Dated as of February 4, 1997
Among
LFI RECEIVABLES CORPORATION,
LFI SERVICING CORPORATION,
as Master Servicer,
THE CHASE MANHATTAN BANK,
as Agent and as Initial Purchaser
and
THE CHASE MANHATTAN BANK,
as Trustee
================================================================================
<PAGE>
TOC Series 1997-2 Supplement
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
SECTION 1.01. Definitions.............................................. 2
ARTICLE II
Designation of VFC Certificates; Purchase and Sale
of the VFC Certificates
SECTION 2.01. Designation.............................................. 27
SECTION 2.02. The Series 1997-2 Certificates and
Series 1997-2 Subordinated Interest..................... 27
SECTION 2.03. Purchases of Interests in the VFC
Certificates and the Series 1997-2
Subordinated Interest................................. 28
SECTION 2.04. Delivery................................................. 29
SECTION 2.05. Procedure for Initial Issuance and for
Increasing the Series 1997-2
Invested Amount....................................... 29
SECTION 2.06. Procedure for Decreasing the Series
1997-2 Invested Amount; Optional
Termination........................................... 31
SECTION 2.07. Reductions of the Commitments............................ 33
SECTION 2.08. Interest; Commitment Fee................................. 34
SECTION 2.09. Indemnification by the Company and the
Master Servicer....................................... 35
ARTICLE III
Article III of the Agreement
SECTION 3A.02. Establishment of Trust Accounts.......................... 37
SECTION 3A.03. Daily Allocations........................................ 39
SECTION 3A.04. Determination of Interest................................ 42
SECTION 3A.05. Determination of Series 1997-2 Monthly
Principal............................................. 44
SECTION 3A.06. Applications............................................. 46
<PAGE>
TOC Series 1997-2 Supplement
Page
----
ARTICLE IV
Distributions and Reports
SECTION 4A.01. Distributions............................................ 49
SECTION 4A.02. Daily Reports............................................ 49
SECTION 4A.03. Statements and Notices................................... 49
ARTICLE V
Additional Early Amortization Events
SECTION 5.01. Additional Early Amortization Events..................... 51
ARTICLE VI
Servicing Fee
SECTION 6.01. Servicing Compensation................................... 56
ARTICLE VII
Change in Circumstances
SECTION 7.01. Illegality............................................... 57
SECTION 7.02. Requirements of Law...................................... 57
SECTION 7.03. Taxes.................................................... 59
SECTION 7.04. Indemnity................................................ 62
SECTION 7.05. Assignment of Commitments Under Certain
Circumstances; Duty to Mitigate....................... 63
SECTION 7.06. Limitation............................................... 65
ARTICLE VIII
Covenants, Representations and Warranties
SECTION 8.01. Representations and Warranties of the
Company and the Master Servicer....................... 65
SECTION 8.02. Covenants of the Company and the Master
Servicer.............................................. 65
SECTION 8.03. Negative Covenant of the Company;
Covenants of the Master Servicer...................... 67
SECTION 8.04. Obligations Unaffected................................... 67
ii
<PAGE>
TOC Series 1997-2 Supplement
Page
----
SECTION 8.05. Representations and Warranties of the
Initial Purchasers and Acquiring
Purchasers............................................ 68
ARTICLE IX
Conditions Precedent
SECTION 9.01. Conditions Precedent to Effectiveness
of Supplement......................................... 70
ARTICLE X
The Agent
SECTION 10.01. Appointment.............................................. 75
SECTION 10.02. Delegation of Duties..................................... 76
SECTION 10.03. Exculpatory Provisions................................... 76
SECTION 10.04. Reliance by Agent........................................ 77
SECTION 10.05. Notice of Master Servicer Default or
Early Amortization Event or
Potential Early Amortization Event.................... 77
SECTION 10.06. Non-Reliance on Agent and Other
Purchasers............................................ 78
SECTION 10.07. Indemnification.......................................... 79
SECTION 10.08. Agent in Its Individual Capacity......................... 80
SECTION 10.09. Successor Agent.......................................... 80
ARTICLE XI
Miscellaneous
SECTION 11.01. Ratification of Agreement................................ 81
SECTION 11.02. Governing Law............................................ 81
SECTION 11.03. Further Assurances....................................... 81
SECTION 11.04. Payments................................................. 81
SECTION 11.05. Costs and Expenses....................................... 82
SECTION 11.06. No Waiver; Cumulative Remedies........................... 82
SECTION 11.07. Amendments............................................... 82
SECTION 11.08. Severability............................................. 84
SECTION 11.09. Notices.................................................. 84
SECTION 11.10. Successors and Assigns................................... 85
SECTION 11.11. Counterparts............................................. 90
SECTION 11.12. Adjustments; Setoff...................................... 90
SECTION 11.13. Limitation of Payments by Company........................ 91
iii
<PAGE>
TOC Series 1997-2 Supplement
Page
----
SECTION 11.14. No Bankruptcy Petition................................... 92
SECTION 11.15. Limitation on Addition and Termination
of Sellers.............................................. 92
ARTICLE XII
Final Distributions
SECTION 12.01. Certain Distributions.................................... 94
EXHIBITS
Exhibit A Form of VFC Certificate, Series 1997-2
Exhibit B Form of Commitment Transfer Supplement
Exhibit C Form of Administrative Questionnaire
Exhibit D Form of Daily Report
Exhibit E Form of Monthly Settlement Statement
Exhibit F Form of Notice of Issuance/Increase
Exhibit G Form of Confidentiality Agreement
SCHEDULES
Schedule 1 Commitments
Schedule 2 Trust Accounts
iv
<PAGE>
Series 1997-2 Supplement
SERIES 1997-2 SUPPLEMENT dated as of February 4, 1997
(this "Supplement"), among LFI RECEIVABLES CORPORATION, a
Delaware corporation (the "Company"), LFI SERVICING
CORPORATION, a Delaware corporation, as master servicer (the
"Master Servicer"), The Chase Manhattan Bank, as the initial
purchaser (the "Initial Purchaser"), the other financial
institutions from time to time parties hereto as purchasers
pursuant to Section 11.10, The Chase Manhattan Bank, a New
York corporation, as agent (the "Agent") for the Purchasers
(as hereinafter defined) in its individual capacity and not as
Trustee and THE CHASE MANHATTAN BANK, in its capacity as
trustee (the "Trustee") under the Agreement.
W I T N E S S E T H :
WHEREAS, the Company, the Master Servicer and the Trustee have
entered into the Amended and Restated Pooling Agreement, dated as of February 4,
1997 (the "Agreement");
WHEREAS, the Agreement provides, among other things, that the
Company, the Master Servicer and the Trustee may at any time and from time to
time enter into supplements to the Agreement for the purpose of authorizing the
issuance on behalf of the Trust by the Company for execution and redelivery to
the Trustee for authentication of one or more Series of Investor Certificates;
and
WHEREAS, the Company, the Master Servicer, the Trustee and the
Initial Purchaser wish to supplement the Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and other good
<PAGE>
2
Series 1997-2 Supplement
and valuable consideration, the receipt and sufficiency of which are hereby
expressly acknowledged, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. (a) The following words and phrases shall
have the following meanings with respect to Series 1997-2 and the definitions of
such terms are applicable to the singular as well as the plural form of such
terms and to the masculine as well as the feminine and neuter genders of such
terms:
"ABR" shall mean, for any day, a per annum alternate base rate
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of
(a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such
day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus
1/2 of 1%. If for any reason, the Agent shall have determined (which
determination shall be conclusive absent manifest error) that it is unable to
ascertain the Base CD Rate or the Federal Funds Effective Rate or both for any
reason, including the inability or failure of the Agent to obtain sufficient
quotations in accordance with the terms of the definition thereof, the Alternate
Base Rate shall be determined without regard to clause (b) or (c), or both, of
the immediately preceding sentence, as appropriate, until the circumstances
giving rise to such inability no longer exist. Any change in the Alternate Base
Rate due to a change in the Prime Rate, the Base CD Rate or the Federal Funds
Effective Rate shall be effective on the effective date of such change in the
Prime Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively.
The term "Prime Rate" shall mean the rate of interest per annum publicly
announced from time to time by the Agent as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall
<PAGE>
3
Series 1997-2 Supplement
be effective on the date such change is publicly announced as being effective.
The term "Base CD Rate" shall mean the sum of (a) the product of (i) the
Three-Month Secondary CD Rate and (ii) Statutory Reserves and (b) the Assessment
Rate. The term "Three-Month Secondary CD Rate" shall mean, for any day, the
secondary market rate for three-month certificates of deposit reported as being
in effect on such day (or, if such day shall not be a Business Day, the next
preceding Business Day) by the Board through the public information telephone
line of the Federal Reserve Bank of New York (which rate will, under the current
practices of the Board, be published in Federal Reserve Statistical Release
H.15(519) during the week following such day), or, if such rate shall not be so
reported on such day or such next preceding Business Day, the average of the
secondary market quotations for three-month certificates of deposit of major
money center banks in New York City received at approximately 10:00 a.m., New
York City time, on such day (or, if such day shall not be a Business Day, on the
next preceding Business Day) by the Agent from three New York City negotiable
certificate of deposit dealers of recognized standing selected by it. The term
"Federal Funds Effective Rate" shall mean, for any day, the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for the day for such transactions received by the Agent from three
Federal funds brokers of recognized standing selected by it.
"Accrual Period" shall mean, with respect to Series 1997-2, the
period from and including a Distribution Date to but excluding the succeeding
Distribution Date; provided that in the case of the initial Accrual Period, it
shall mean the period from and including the Issuance Date to but excluding
March 17, 1997.
<PAGE>
4
Series 1997-2 Supplement
"Accrued Expense Adjustment" shall mean, for any Business Day in any
Accrual Period, the amount, if any, which may be less than zero, equal to the
difference between (a) the entire amount of (i) the Commitment Fee, if any, due
and payable on the next succeeding Distribution Date, (ii) the Series 1997-2
Monthly Interest to be distributed on the next succeeding Distribution Date,
(iii) the Series 1997-2 Monthly Servicing Fee, (iv) the aggregate amount of all
previously accrued, unpaid and unallocated Series 1997-2 Monthly Interest for
prior Distribution Dates, (v) the aggregate amount of all accrued, unpaid and
unallocated Additional Interest and (vi) all accrued Program Costs, in each case
for such Accrual Period determined as of such day, and (b) the aggregate of the
amounts transferred to the Series 1997-2 Non-Principal Collection Sub-subaccount
on or before such day in respect of such Accrual Period pursuant to subsection
3A.03(a)(i), before giving effect to any transfer made in respect of the Accrued
Expense Adjustment on such day pursuant to the further proviso to such
subsection.
"Accrued Expense Amount" shall mean, for each Business Day during an
Accrual Period, the sum of (a) in the case of each of the first ten Business
Days in the Accrual Period, one-tenth of the Series 1997-2 Monthly Interest
determined as of such Business Day, (b) in the case of each of the first ten
Business Days in the Accrual Period, one-tenth of the Commitment Fee payable to
the VFC Certificateholders on the next succeeding Distribution Date, (c) in the
case of each of the first ten Business Days in the Accrual Period, one-tenth of
the Series 1997-2 Monthly Servicing Fee (in the case of each of the foregoing
clauses (a) through (c), up to the amount thereof due and payable on the
succeeding Distribution Date, but subject to Accrued Expense Adjustments as
provided in subsection 3A.03(a)(i)), (d) the aggregate amount of all previously
accrued, unpaid and unallocated Series 1997-2 Monthly Interest for prior
Distribution Dates, (e) the aggregate amount of all accrued, unpaid and
unallocated Additional Interest and (f) all
<PAGE>
5
Series 1997-2 Supplement
Program Costs that have accrued since the preceding Business Day.
"Acquiring Purchaser" shall have the meaning assigned in subsection
11.10(b).
"Additional Interest" shall have the meaning assigned in subsection
3A.04(b).
"Aged Receivables Ratio" shall mean, as of the last day of each
Settlement Period, the percentage equivalent of a fraction, the numerator of
which shall be the sum of (a) the aggregate unpaid balance of Receivables
originated by the Sellers that were 91 to 120 days past due and (b) the
aggregate amount of Receivables of such Sellers that were charged off as
uncollectible prior to the day that is 91 days after its original due date
during such Settlement Period, and the denominator of which shall be the
aggregate Principal Amount of Receivables originated by the Sellers during the
fourth prior Settlement Period (including the Settlement Period ended on such
day).
"Agent" shall have the meaning specified in the recitals hereto.
"Aggregate Commitment Amount" shall mean, with respect to any
Business Day, the aggregate amount of the Commitments of all Purchasers on such
date, as reduced from time to time pursuant to Section 2.07.
"Applicable Margin" shall mean at any date of determination, for
each Eurodollar Tranche, 1.0% per annum and, for the Floating Tranche, 0.0% per
annum.
"Article VII Costs" shall mean any amounts due pursuant to Article
VII.
"Assessment Rate" shall mean, for any date, the annual rate (rounded
upwards, if necessary, to the next 1/100 of 1%) most recently estimated by the
Agent as the
<PAGE>
6
Series 1997-2 Supplement
then current net annual assessment rate that will be employed in determining
amounts payable by the Agent to the Federal Deposit Insurance Corporation (or
any successor) for insurance by such corporation (or such successor) of time
deposits made in U.S. Dollars at the Agent's domestic offices.
"Available Commitment" shall mean, with respect to any Business Day,
the (i) Aggregate Commitment Amount on such Business Day minus (ii) the Series
1997-2 Invested Amount.
"Available Pricing Amount" shall mean, on any Business Day, the sum
of (i) the Unallocated Balance plus (ii) the Increase, if any, on such date.
"Benefitted Purchaser" shall have the meaning assigned in Section
11.12.
"Carrying Cost Reserve Ratio" shall mean, as of any Settlement
Report Date and continuing until (but not including) the next Settlement Report
Date, an amount (expressed as a percentage) equal to (a) the product of (i) 2.0
times Days Sales Outstanding as of such day and (ii) 1.30 times the ABR in
effect as of such day divided by (b) 365.
"Certificate Rate" shall mean on any date of determination, the
average (weighted based on the respective outstanding amounts of the Floating
Tranche and each Eurodollar Tranche) of the ABR in effect on such day and
One-Month LIBOR in effect on such day plus, in each case, the Applicable Margin.
"Change in Control" shall mean the occurrence of any event the
result of which causes Lifestyle Holdings Ltd. or the Company not to be a direct
or indirect, wholly owned Subsidiary of Lifestyle Furnishings International Ltd.
<PAGE>
7
Series 1997-2 Supplement
"Claim" shall have the meaning specified in subsection 2.09(a).
"Commitment" shall mean, as to any Purchaser, its obligation to
maintain and, subject to certain conditions, increase, its Series 1997-2
Purchaser Invested Amount, in an aggregate amount not to exceed at any one time
outstanding the amount set forth opposite such Purchaser's name on Schedule 1
under the caption "Commitment", as such amount may be reduced from time to time
as provided herein; collectively, as to all Purchasers, the "Commitments".
"Commitment Fee" shall have the meaning assigned in subsection
2.08(b).
"Commitment Percentage" shall mean, as to any Purchaser and as of
any date, the percentage equivalent of a fraction, the numerator of which is
such Purchaser's Commitment as set forth on Schedule 1 and the denominator of
which is the Aggregate Commitment Amount as of such date.
"Commitment Period" shall mean the period commencing on the Issuance
Date and terminating on the date that the Series 1997-2 Amortization Period
commences.
"Commitment Reduction" shall have the meaning assigned in subsection
2.07(a).
"Commitment Termination Date" shall mean the earlier of (a) the
Scheduled Revolving Termination Date and (b) the date on which the Commitments
are terminated in whole pursuant to Section 2.07.
"Commitment Transfer Supplement" shall have the meaning assigned in
subsection 11.10(c).
"Company Indemnified Person" shall have the meaning assigned in
subsection 2.09(a).
<PAGE>
8
Series 1997-2 Supplement
"Daily Interest Adjustment" shall mean, for any Business Day in any
Accrual Period, the amount, if any, which may be less than zero, equal to the
difference between (i) the sum of (A) the Series 1997-2 Monthly Interest
determined as of such day, (B) the aggregate amount of all previously accrued,
unpaid and unallocated Series 1997-2 Monthly Interest for prior Distribution
Dates and (C) the aggregate amount of all accrued, unpaid and unallocated
Additional Interest and (ii) the amount on deposit in the Series 1997-2 Accrued
Interest Sub-subaccount on such day after making any deposit thereto pursuant to
subsection 3A.03(c), before giving effect to any transfer made in respect of the
Daily Interest Adjustment on such day pursuant to the proviso to such
subsection.
"Daily Interest Deposit" shall mean, for any Business Day, an amount
equal to (i) the amount of accrued and unpaid Daily Interest Expense in respect
of such day plus (ii) the aggregate amount of all previously accrued, unpaid and
unallocated Series 1997-2 Monthly Interest for prior Distribution Dates plus
(iii) the aggregate amount of all accrued, unpaid and unallocated Additional
Interest.
"Daily Interest Expense" for any day in any Accrual Period, shall
mean the sum of (A) the product of (i) the portion of the Series 1997-2 Invested
Amount (calculated without regard to clauses (d) and (e) of the definition of
Series 1997-2 Purchaser Invested Amount) allocable to the Floating Tranche on
such day divided by 365 and (ii) the ABR plus the Applicable Margin in effect on
such day, and (B) the product of (i) the portion of the Series 1997-2 Invested
Amount (calculated without regard to clauses (d) and (e) of the definition of
Series 1997-2 Purchaser Invested Amount) allocable to Eurodollar Tranches on
such day divided by 360 and (ii) One-Month LIBOR plus the Applicable Margin on
such day in effect with respect thereto; provided, however, that for the
purposes of calculating Series 1997-2 Monthly Interest, the "Daily Interest
Expense" for any day following the date of determination shall be based on the
allocable portions of
<PAGE>
9
Series 1997-2 Supplement
the Series 1997-2 Invested Amount, the ABR, One-Month LIBOR and the Applicable
Margins as of or in effect on such date of determination; provided, further,
that for any such day during the continuation of an Early Amortization Period,
the "Daily Interest Expense" for such day shall be equal to the greater of (i)
the sum of the amounts calculated pursuant to clauses (A) and (B) above and (ii)
the product of (x) the Series 1997-2 Invested Amount on such day divided by 365
and (y) the ABR in effect on such day plus 2.00% per annum.
"Daily Report" shall mean a report prepared by the Master Servicer
on each Business Day for the period specified therein, in substantially the form
of Exhibit D.
"Days Sales Outstanding" shall mean, as of any Settlement Report
Date and continuing until the next Settlement Report Date, the number of days
equal to the product of (a) 91 and (b) the amount obtained by dividing (i) the
aggregate Principal Amount of Eligible Receivables as at the last day of the
Settlement Period immediately preceding such earlier Settlement Report Date, by
(ii) the aggregate Principal Amount of Receivables generated by the Sellers for
the three Settlement Periods immediately preceding such earlier Settlement
Report Date.
"Decrease" shall have the meaning assigned in Section 2.06.
"Dilution Horizon" shall mean the number of days from the invoicing
of a Receivable until a Dilution Adjustment with respect to such Receivable is
issued by the related Seller or the related Seller receives notice that a
Dilution Adjustment will have to be issued in respect of such Receivable;
provided, however, that in no event shall the Dilution Horizon be less than 30
days.
"Dilution Horizon Factor" shall mean (a) for the period from the
Issuance Date until the sixth Settlement Report Date to occur thereafter, 3.167
and (b) for each six-month period to occur after such initial period, a
<PAGE>
10
Series 1997-2 Supplement
fraction, the numerator of which is the dollar weighted average Dilution Horizon
of the Sellers (based upon the Dilution Adjustment of the selected Receivables)
for such period (which shall be calculated by the related Servicer, in
accordance with its past procedures for such calculations, selecting a random
sample of approximately 200 Dilution Adjustment memos from each Seller created
during such period and determining the Dilution Horizon therefrom) and the
denominator of which is 30; provided, however, that the numerator used to
calculate the Dilution Horizon Factor shall in no event be less than 30;
provided, further, that if the Dilution Horizon Factor for any period is less
than the Dilution Horizon Factor for the immediately preceding period, then the
actual Dilution Horizon Factor for such current period shall be recalculated to
equal a fraction, the numerator of which is equal to the average of the
numerators used to calculate the Dilution Horizon Factor for such immediately
preceding period and such current period (but not less than 30) and the
denominator of which is 30.
"Dilution Period" shall mean, as of any Settlement Report Date and
continuing until (but not including) the next Settlement Report Date, the
quotient of (i) the product of (A) the aggregate Principal Amount of Receivables
that were originated by the Sellers during the Settlement Period preceding such
earlier Settlement Report Date and (B) the Dilution Horizon Factor and (ii) the
Aggregate Receivables Amount as of the last day of the Settlement Period
preceding such earlier Settlement Report Date.
"Dilution Ratio" shall mean, as of the last day of each Settlement
Period, an amount (expressed as a percentage) equal to the aggregate amount of
Dilution Adjustments made during such Settlement Period divided by the aggregate
Principal Amount of Receivables that were originated by the Sellers during the
second prior Settlement Period (including the Settlement Period ending on such
day).
"Dilution Reserve Ratio" shall mean, as of any Settlement Report
Date and continuing until (but not
<PAGE>
11
Series 1997-2 Supplement
including) the next Settlement Report Date, an amount (expressed as a
percentage) that is calculated as follows:
DRR = [(c * d) + [(e-d) * (e/d)]] * f
Where:
DRR = Dilution Reserve Ratio;
c = 2.00;
d = the three-month rolling average of the Dilution Ratio that occurred
during the period of three consecutive Settlement Periods ending
immediately prior to such earlier Settlement Report Date; provided,
however, that if the Dilution Horizon is (i) at least two but less
than three, "d" shall equal the two-month rolling average of the
Dilution Ratio that occurred during the period of two consecutive
Settlement Periods ending immediately prior to such earlier
Settlement Report Date or (ii) less than two, "d" shall equal the
Dilution Ratio for the Settlement Period ending immediately prior to
such earlier Settlement Report Date;
e = the highest three-month rolling average of the Dilution Ratio that
occurred during the period of twelve consecutive Settlement Periods
ending prior to such earlier Settlement Report Date; provided,
however, that if the Dilution Horizon Factor is (i) at least two but
less than three, "e" shall equal the highest two-month rolling
average of the Dilution Ratio that occurred during the period of
twelve consecutive Settlement Periods ending prior to such earlier
Settlement Report Date or (ii) less than two, "e" shall equal the
highest Dilution Ratio for any Settlement Period during the period
of twelve consecutive Settlement
<PAGE>
12
Series 1997-2 Supplement
Periods ending prior to such earlier Settlement Report Date; and
f = the Dilution Period.
"Early Amortization Event" shall have the meanings assigned in
Section 5.01 of this Supplement and Section 7.01 of the Agreement.
"Early Amortization Period" shall have the meaning assigned in
Section 5.01 of this Supplement and Section 7.01 of the Agreement.
"Effective Date" shall have the meaning assigned in Section 9.01.
"Eurodollar Period" shall mean, with respect to any Eurodollar
Tranche:
(a) initially, the period commencing on the Issuance Date, Increase
Date or conversion date, as the case may be, with respect to such
Eurodollar Tranche and ending one month thereafter; and
(b) thereafter, each period commencing on the last day of the
immediately preceding Eurodollar Period applicable to such Eurodollar
Tranche and ending one month thereafter;
provided that, all of the foregoing provisions relating to Eurodollar Periods
are subject to the following:
(1) if any Eurodollar Period would otherwise end on a day that is
not a Business Day, such Eurodollar Period shall be extended to the next
succeeding Business Day unless the result of such extension would be to
carry such Eurodollar Period into another calendar month in which event
such Eurodollar Period shall end on the immediately preceding Business
Day;
<PAGE>
13
Series 1997-2 Supplement
(2) any Eurodollar Period that would otherwise extend beyond the
Scheduled Revolving Termination Date shall end on the Scheduled Revolving
Termination Date; and
(3) any Eurodollar Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Eurodollar
Period) shall end on the last Business Day of a calendar month.
"Eurodollar Tranche" shall mean a portion of the Series 1997-2
Invested Amount for which the Series 1997-2 Monthly Interest is calculated by
reference to One-Month LIBOR determined by reference to a particular Eurodollar
Period.
"Excess Program Costs" shall have the meaning assigned to such term
within the definition of "Program Costs".
"Floating Tranche" shall mean that portion of the Series 1997-2
Invested Amount not allocated to a Eurodollar Tranche for which the Series
1997-2 Monthly Interest is calculated by reference to the ABR.
"Government Obligor Factor" shall mean 2.5% for the three month
period from December through February of any year and 1.5% for the nine month
period from March through November of any year.
"HFG Companies" shall mean Ametex Fabrics, Inc., The Berkline
Corporation, Drexel Heritage Furnishings Inc., Henredon Furniture Industries,
Inc., Interior Fabric Design, Inc., Intro Europe, Inc., La Barge, Inc.,
Lexington Furniture Industries, Inc., Lifestyle Holdings Ltd., Maitland-Smith,
Inc., Marbro Lamp Company, Ramm, Son & Crocker, Inc., Robert Allen Fabrics,
Inc., Robert Allen Fabrics of N.Y., Inc., Sunbury Textile Mills, Inc.,
<PAGE>
14
Series 1997-2 Supplement
Universal Furniture Limited, Lineage Home Furnishings, Inc., and Masco Home
Furnishings, Inc.
"Increase" shall have the meaning assigned in subsection 2.05(a).
"Increase Amount" shall have the meaning assigned in subsection
2.05(a).
"Increase Date" shall have the meaning assigned in subsection
2.05(a).
"Initial Purchaser" shall have the meaning specified in the recitals
hereto.
"Initial Series 1997-2 Invested Amount" shall mean $0.
"Initial Series 1997-2 Subordinated Interest Amount" shall mean the
Series 1997-2 Subordinated Interest Amount in respect of the Issuance Date.
"Interest Shortfall" shall have the meaning assigned in subsection
3A.04(b).
"Invested Amount" shall mean, with respect to Series 1997-2, the
Series 1997-2 Invested Amount.
"Issuance Date" shall mean February 4, 1997.
"Loss Reserve Ratio" shall mean, as of any Settlement Report Date
and continuing until (but not including) the next Settlement Report Date, an
amount (expressed as a percentage) that is calculated as follows:
LRR = [(a * b)/c] * d * e
<PAGE>
15
Series 1997-2 Supplement
Where:
LRR = Loss Reserve Ratio;
a = the aggregate Principal Amount of Receivables originated by the
Sellers during the three Settlement Periods immediately preceding
such earlier Settlement Report Date;
b = the highest three-month rolling average of the Aged Receivables
Ratio that occurred during the period of twelve consecutive
Settlement Periods ending prior to such earlier Settlement Report
Date;
c = the Aggregate Receivables Amount as of the last day of the
Settlement Period immediately preceding such earlier Settlement
Report Date;
d = 2.00; and
e = the Payment Terms Factor.
"Majority Purchasers" shall mean, on any day, Purchasers having, in
the aggregate, more than 50% of the Aggregate Commitment Amount.
"Master Servicer Indemnified Person" shall have the meaning
specified in subsection 2.09(b).
"Maximum Commitment Amount" shall mean $50,000,000.
"Maximum Invested Amount" shall mean, as of any day, the lesser of
(a) the Maximum Commitment Amount as of such day and (b) the Aggregate
Receivables Amount as of such day minus the Series 1997-2 Required Subordinated
Amount as of such day.
<PAGE>
16
Series 1997-2 Supplement
"Minimum Ratio" shall mean, as of any Settlement Report Date and
continuing until (but not including) the next Settlement Report Date, an amount
(expressed as a percentage) that is calculated as follows:
MR = (a * b) + c + d
Where:
MR = Minimum Ratio;
a = the average of the Dilution Ratio during the period of the twelve
consecutive Settlement Periods ending prior to such earlier
Settlement Report Date;
b = the Dilution Period;
c = 12.0%; and
d = Government Obligor Factor.
"Monthly Interest Payment" shall have the meaning assigned in
subsection 3A.06(b).
"One-Month LIBOR" shall mean, with respect to any Eurodollar Tranche
for any Eurodollar Period, the rate per annum, as recorded 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 Eurodollar Period that appears on Page 3750 of the Telerate
(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
Trustee 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, two Business Days prior to the
commencement of such
<PAGE>
17
Series 1997-2 Supplement
Eurodollar Period. In the event that such rate is not so available at such time
for any reason, then "One-Month LIBOR" for such Eurodollar 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 Trustee in immediately available funds in the London interbank market at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Eurodollar Period.
"Optional Repurchase Percentage" shall mean 10% of the largest
Series 1997-2 Invested Amount at any time on or before the date of
determination.
"Optional Termination Date" shall have the meaning assigned in
subsection 2.06(d)(i).
"Optional Termination Notice" shall have the meaning assigned in
subsection 2.06(d)(i).
"Participants" shall have the meaning assigned in subsection
11.10(f).
"Payment Terms Factor" shall mean (a) for the period from the
Issuance Date until the third Settlement Report Date to occur thereafter, 1.14
and (b) for each three-month period to occur after such initial period, a
fraction, the numerator of which is the sum of (i) the weighted average payment
terms (based upon the Principal Amount of the Receivables and expressed as a
number of days) for the Receivables originated during such period and (ii) 60
and the denominator of which is 90; provided, however, that if the Payment Terms
Factor for any period is less than the Payment Terms Factor for the immediately
preceding period, then the actual Payment Terms Factor for such current period
shall be recalculated to equal a fraction, the numerator of which is equal to
the average of the numerators used to calculate the Payment Terms Factor for
such current period and the three immediately preceding periods and the
denominator of which is 90.
<PAGE>
18
Series 1997-2 Supplement
"Program Costs" shall mean, for any Business Day, the sum of (i) all
expenses, indemnities and other amounts due and payable to the Purchasers and
the Agent under the Agreement or this Supplement (including, without limitation,
any Article VII Costs), (ii) the product of (A) all unpaid fees and expenses due
and payable to counsel to, and independent auditors of, the Company (other than
fees and expenses payable on or in connection with the closing of the issuance
of the VFC Certificates) and (B) a fraction, the numerator of which is the
Aggregate Commitment Amount on such Business Day and the denominator of which is
the sum of (x) the Series 1997-1 Invested Amount on such Business Day and (y)
the Aggregate Commitment Amount on such Business Day and (iii) all unpaid fees
and expenses due and payable to Rating Agencies rating the VFC Certificates;
provided, however, that Program Costs shall not exceed $50,000 in the aggregate
in any fiscal year of the Master Servicer (any amount of the foregoing expenses,
indemnities and fees in excess of $50,000 shall be referred to herein as "Excess
Program Costs").
"Purchase Termination Event" shall have the meaning assigned in
Section 7.01 of the Receivables Sale Agreement.
"Purchaser" shall mean each purchaser of a VFC Certificate,
including each Initial Purchaser and each Acquiring Purchaser.
"Rating Agency" shall mean, in the event that Series 1997-2 has been
rated, S&P, DCR or any such other rating agency that has rated the VFC
Certificates at the request of the Agent, as applicable; provided that in the
event that Series 1997-2 has not been rated, any reference to "Rating Agency" or
the "Rating Agencies" shall be deemed to have been deleted herefrom and from the
Agreement; provided that, in the case of the term "Rating Agency Condition" and
in the event that Series 1997-2 has not been rated, references to such term
shall not be deemed deleted
<PAGE>
19
Series 1997-2 Supplement
but shall be modified as set forth under the definition of such term.
"Rating Agency Condition" shall, with respect to any action, have
the meaning assigned in Section 1.01 of the Agreement; provided that in the
event that Series 1997-2 has not been rated, any reference to a "Rating Agency
Condition" shall be deemed to be a reference to the prior written consent of the
Agent with respect to such action.
"Record Date" shall mean, with respect to any Distribution Date, the
Business Day immediately preceding such date.
"Register" shall have the meaning assigned in subsection 11.10(d).
"Scheduled Revolving Termination Date" shall mean the last day of
the Settlement Period ending in October 2001.
"Seller Addition Date" shall have the meaning assigned in Section
3.05 of the Receivables Sale Agreement.
"Series 1997-2" shall mean the Series of Investor Certificates and
Subordinated Company Interest, the Principal Terms of which are set forth in
this Supplement.
"Series 1997-2 Accrued Interest Sub-subaccount" shall have the
meaning assigned in subsection 3A.02(a).
"Series 1997-2 Adjusted Invested Amount" shall mean, as of any date
of determination, (i) the Series 1997-2 Invested Amount on such date, minus (ii)
the amount on deposit in the Series 1997-2 Principal Collection Sub- subaccount
on such date up to a maximum of the Series 1997-2 Invested Amount.
"Series 1997-2 Allocable Charged-Off Amount" shall mean, with
respect to any Special Allocation Settlement
<PAGE>
20
Series 1997-2 Supplement
Report Date, the "Allocable Charged-Off Amount", if any, that has been allocated
to Series 1997-2.
"Series 1997-2 Allocable Recoveries Amount" shall mean, with respect
to any Special Allocation Settlement Report Date, the "Allocable Recoveries
Amount", if any, that has been allocated to Series 1997-2.
"Series 1997-2 Allocated Receivables Amount" shall mean, on any date
of determination, the lower of (i) the Series 1997-2 Target Receivables Amount
on such day and (ii) the Aggregate Receivables Amount on such day times the
percentage equivalent of a fraction the numerator of which is the Series 1997-2
Target Receivables Amount on such day and the denominator of which is the
Aggregate Target Receivables Amount on such day.
"Series 1997-2 Amortization Period" shall mean the period commencing
on the Business Day following the earliest to occur of (i) the date on which an
Early Amortization Period is declared to commence or automatically commences,
(ii) the Optional Termination Date and (iii) the Scheduled Revolving Termination
Date and ending on the earlier of (i) the date when the Series 1997-2 Invested
Amount shall have been reduced to zero and all accrued interest and other
amounts owing on the VFC Certificates and to the Agent and the Purchasers
hereunder shall have been paid and (ii) the Series 1997-2 Termination Date.
"Series 1997-2 Collections" shall mean, with respect to any Business
Day, an amount equal to the product of (i) the Series 1997-2 Invested Percentage
on such Business Day and (ii) Aggregate Daily Collections.
"Series 1997-2 Collection Subaccount" shall have the meaning
assigned in subsection 3A.02(a).
"Series 1997-2 Invested Amount" shall mean, as of any date of
determination, the sum of the Series 1997-2 Purchaser Invested Amounts of all
Purchasers on such date.
<PAGE>
21
Series 1997-2 Supplement
"Series 1997-2 Invested Percentage" shall mean, with respect to any
Business Day (i) during the Series 1997-2 Revolving Period, the percentage
equivalent of a fraction, the numerator of which is the Series 1997-2 Allocated
Receivables Amount as of the end of the immediately preceding Business Day and
the denominator of which is the greater of (A) the Aggregate Receivables Amount
as of the end of the immediately preceding Business Day and (B) the sum of the
numerators used to calculate the Invested Percentage for all Outstanding Series
on the Business Day for which such percentage is determined and (ii) during the
Series 1997-2 Amortization Period, the percentage equivalent of a fraction, the
numerator of which is the Series 1997-2 Allocated Receivables Amount as of the
end of the last Business Day of the Series 1997-2 Revolving Period (provided
that if during the Series 1997-2 Amortization Period, the amortization periods
of all other Outstanding Series which were outstanding prior to the commencement
of the Series 1997-2 Amortization Period commence, then, from and after the date
the last of such series commences its Amortization Period, the numerator shall
be the Series 1997-2 Allocated Receivables Amount as of the end of the Business
Day preceding such date) and the denominator of which is the greater of (A) the
Aggregate Receivables Amount as of the end of the immediately preceding Business
Day and (B) the sum of the numerators used to calculate the Invested Percentage
for all Outstanding Series on the Business Day for which such percentage is
determined.
"Series 1997-2 Monthly Interest" shall mean, with respect to any
Accrual Period, the sum of the Daily Interest Expense for each day in such
Accrual Period.
"Series 1997-2 Monthly Interest Distribution" shall have the meaning
assigned in subsection 3A.04(a).
"Series 1997-2 Monthly Principal Payment" shall have the meaning
assigned in Section 3A.05.
<PAGE>
22
Series 1997-2 Supplement
"Series 1997-2 Monthly Servicing Fee" shall have the meaning
assigned in Section 6.01.
"Series 1997-2 Non-Principal Collection Sub- subaccount" shall have
the meaning assigned in subsection 3A.02(a).
"Series 1997-2 Principal Collection Sub- subaccount" shall have the
meaning assigned in subsection 3A.02(a).
"Series 1997-2 Purchaser Invested Amount" shall mean, with respect
to any Purchaser on the Issuance Date, an amount equal to the product of such
Purchaser's Commitment Percentage on such date and the Initial Series 1997-2
Invested Amount, and with respect to such Purchaser on any date of determination
thereafter, an amount equal to (a) such Purchaser's Series 1997-2 Invested
Amount on the immediately preceding Business Day (or, with respect to the day as
of which such Purchaser becomes a party to this Supplement, whether by executing
a counterpart hereof, a Commitment Transfer Supplement or otherwise, the portion
of the transferor's Series 1997-2 Purchaser Invested Amount being purchased, in
the case of an Acquiring Purchaser), plus (b) the amount of any increases in
such Purchaser's Series 1997-2 Invested Amount pursuant to Section 2.05 made on
such day, minus (c) the amount of any distributions to such Purchaser pursuant
to Section 2.06 or subsection 3A.06(c)(i) on such day minus (d) the aggregate
Series 1997-2 Allocable Charged-Off Amount applied to such Purchaser on or prior
to such date pursuant to subsection 3A.05(b)(ii) plus (e) (but only to the
extent of any unreimbursed reductions made pursuant to clause (d) above) the
aggregate Series 1997-2 Allocable Recoveries Amount applied to such Purchaser on
or prior to such date pursuant to subsection 3A.05(c)(i).
"Series 1997-2 Required Reserves Ratio" shall mean, the greater of
(i) the sum of the Dilution Reserve Ratio and the Loss Reserve Ratio and (ii)
the Minimum Ratio.
<PAGE>
23
Series 1997-2 Supplement
"Series 1997-2 Required Subordinated Amount" shall mean, (a) on any
date of determination during the Series 1997-2 Revolving Period, an amount equal
to the sum of:
(i) an amount equal to the product of (A) the Series 1997-2 Adjusted
Invested Amount on such day and (B) a fraction the numerator of which is
the Series 1997-2 Required Reserves Ratio and the denominator of which is
one minus the Series 1997-2 Required Reserves Ratio;
(ii) the product of (A) the Series 1997-2 Invested Amount and (B) a
fraction the numerator of which is the Carrying Cost Reserve Ratio and the
denominator of which is one minus the Series 1997-2 Required Reserves
Ratio; and
(iii) the product of (A) the Principal Amount of Receivables in the
Trust on such day, (B) a fraction the numerator of which is the Series
1997-2 Invested Amount and the denominator of which is the Aggregate
Invested Amount on such day and (C) a fraction the numerator of which is
the Servicing Reserve Ratio and the denominator of which is one minus the
Series 1997-2 Required Reserves Ratio.
and (b) on any date of determination during the Series 1997-2 Amortization
Period, an amount equal to the Series 1997-2 Required Subordinated Amount on the
last Business Day of the Series 1997-2 Revolving Period; provided that such
amount shall be adjusted on each Special Allocation Settlement Report Date, if
any, as set forth in Section 3A.05(b)(i) and Section 3A.05(c)(ii).
"Series 1997-2 Revolving Period" shall mean the period commencing on
the Issuance Date and terminating on the earliest to occur of the close of
business on (i) the date on which an Early Amortization Period is declared to
<PAGE>
24
Series 1997-2 Supplement
commence or automatically commences, (ii) the Optional Termination Date and
(iii) the Commitment Termination Date.
"Series 1997-2 Subordinated Interest" shall have the meaning
assigned in subsection 2.02(b).
"Series 1997-2 Subordinated Interest Amount" shall mean, for any
date of determination, an amount equal to (i) the Series 1997-2 Allocated
Receivables Amount minus (ii) the Series 1997-2 Adjusted Invested Amount.
"Series 1997-2 Subordinated Interest Increase Amount" shall have the
meaning assigned in subsection 2.05(a).
"Series 1997-2 Subordinated Interest Reduction Amount" shall have
the meaning assigned in subsection 2.06(b).
"Series 1997-2 Target Receivables Amount" shall mean, on any date of
determination, the sum of (i) the Series 1997-2 Adjusted Invested Amount on such
day and (ii) the Series 1997-2 Required Subordinated Amount for such day.
"Series 1997-2 Termination Date" shall mean the Distribution Date
that occurs in August 2002.
"Servicing Reserve Ratio" shall mean, as of any Settlement Report
Date and continuing until (but not including) the next Settlement Report Date,
an amount (expressed as a percentage) equal to (i) the product of (A) the
Servicing Fee Percentage and (B) 2.0 times Days Sales Outstanding as of such
earlier Settlement Report Date divided by (c) 360.
"Statutory Reserves" shall mean a fraction (expressed as a decimal),
the numerator of which is the number one and the denominator of which is the
number one
<PAGE>
25
Series 1997-2 Supplement
minus the aggregate of the maximum reserve percentages (including any marginal,
special, emergency or supplemental reserves) expressed as a decimal established
by the Board and any other banking authority, domestic or foreign, to which the
Agent is subject for new negotiable nonpersonal time deposits in dollars of over
$100,000 with maturities approximately equal to three months. Statutory Reserves
shall be adjusted automatically on and as of the effective date of any change in
any reserve percentage.
"Transfer Issuance Date" shall mean the date on which a Commitment
Transfer Supplement becomes effective pursuant to the terms of such Commitment
Transfer Supplement.
"Transferee" shall have the meaning assigned in subsection 11.10(f).
"Trust Accounts" shall have the meaning assigned in subsection
3A.02(a).
"Unallocated Balance" shall mean, as of any Business Day, the sum of
(i) the portion of the Series 1997-2 Invested Amount for which interest is then
being calculated by reference to the ABR and (ii) the portion of the Series
1997-2 Invested Amount allocated to any Eurodollar Tranche that expires on such
Business Day.
"VFC Certificate" shall mean a VFC Certificate, Series 1997-2,
executed by the Company and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A.
"VFC Certificateholders" shall mean the Purchasers.
"VFC Certificateholders' Interest" shall have the meaning assigned
in subsection 2.02(a).
<PAGE>
26
Series 1997-2 Supplement
(b) If any term, definition or provision contained herein conflicts
with or is inconsistent with any term, definition or provision contained in the
Agreement, the terms and provisions of this Supplement shall govern. All
capitalized terms not otherwise defined herein are defined in the Agreement. All
Article, Section, subsection, Exhibit and Schedule references herein shall mean
Article, Section or subsection of or Exhibit or Schedule to this Supplement,
except as otherwise provided herein. Unless otherwise stated herein, as the
context otherwise requires or if such term is otherwise defined in the
Agreement, each capitalized term used or defined herein shall relate only to the
VFC Certificates and the Series 1997-2 Subordinated Interest and to no other
Series of Investor Certificates or Subordinated Company Interest issued by the
Trust.
(c) Any reference herein to a Schedule or Exhibit to this Supplement
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.
(d) Any reference in this Supplement 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
Supplement, and no such reference shall be interpreted as a reference to any
implicit, inferred, tacit or otherwise unexpressed representation, warranty or
covenant.
(e) The words "include", "includes" or "including" shall be
interpreted as if followed, in each case, by the phrase "without limitation".
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Series 1997-2 Supplement
ARTICLE II
Designation of VFC Certificates; Purchase and
Sale of the VFC Certificates
SECTION 2.01. Designation. The Investor Certificates created and
authorized pursuant to the Agreement and this Supplement shall be designated as
the "VFC Certificates, Series 1997-2."
SECTION 2.02. The VFC Certificates and Series 1997-2 Subordinated
Interest. (a) The VFC Certificates shall represent fractional undivided
interests in the Trust Assets, consisting of the right of the VFC
Certificateholders to receive the distributions specified herein out of (i) the
Series 1997-2 Invested Percentage (expressed as a decimal) of Collections
received with respect to the Receivables and all other funds on deposit in the
Collection Account and (ii) to the extent such interests appear herein, all
other funds on deposit in the Series 1997-2 Collection Subaccount and any
subaccounts thereof (collectively, the "VFC Certificateholders' Interest").
(b) The Company shall retain a fractional undivided interest in the
Trust Assets, consisting of the right of the holder of the Series 1997-2
Subordinated Company Interest to receive the distributions specified herein out
of (i) the Series 1997-2 Invested Percentage (expressed as a decimal) of
Collections received with respect to the Receivables and all other funds on
deposit in the Collection Account and (ii) to the extent such interests appear
herein, all other funds on deposit in the Series 1997-2 Collection Subaccount
and any subaccounts thereof, in each case to the extent not required to be
distributed to or for the benefit of the VFC Certificateholders (the "Series
1997-2 Subordinated Interest"). The Exchangeable Company Interest and any other
Series of Investor Certificates or Subordinated Company
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Series 1997-2 Supplement
Interests outstanding shall represent the ownership interests in the remainder
of the Trust Assets not allocated pursuant hereto to the VFC Certificateholders'
Interest or the Series 1997-2 Subordinated Interest.
(c) The VFC Certificates shall be substantially in the forms of
Exhibit A, and shall, upon issue, be executed and delivered by the Company to
the Trustee for authentication and redelivery as provided in Section 2.04 hereof
and Section 5.02 of the Agreement. The VFC Certificates shall not be issued in
the form of a single global certificate as provided for in Section 5.01 of the
Agreement, but shall instead be issued in the form of one or more definitive
certificates, each registered in the name of a Purchaser as the holder thereof.
The Series 1997-2 Subordinated Interest shall be uncertificated.
SECTION 2.03. Purchases of Interests in the VFC Certificates and the
Series 1997-2 Subordinated Interest. (a) Initial Purchase. Subject to the terms
and conditions of this Supplement, including delivery of notice in accordance
with Section 2.04, (i) each Initial Purchaser hereby severally agrees (A) to
purchase on the Issuance Date a VFC Certificate in an amount equal to such
Initial Purchaser's Commitment Percentage of the Initial Series 1997-2 Invested
Amount and (B) to maintain its VFC Certificate, subject to increase or decrease
during the Series 1997-2 Revolving Period, in accordance with the provisions of
this Supplement and (ii) the Company hereby agrees (A) to purchase from the
Trust on the Issuance Date the rights as holder of the Series 1997-2
Subordinated Interest in an amount equal to the Initial Series 1997-2
Subordinated Interest Amount and (B) to maintain such interest in the Series
1997-2 Subordinated Interest, subject to increase or decrease during the Series
1997-2 Revolving Period, in accordance with the provisions of this Supplement.
Payments by the Initial Purchasers in respect of the VFC Certificates shall be
made in immediately available funds on the Issuance Date to the Agent for
payment to the Trust.
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Series 1997-2 Supplement
(b) Subsequent Purchases. Subject to the terms and conditions of
this Supplement, each Acquiring Purchaser shall be deemed to have severally
agreed, by its acceptance of its VFC Certificate, to maintain its VFC
Certificate, subject to increase or decrease during the Series 1997-2 Revolving
Period, in accordance with the provisions of this Supplement.
(c) Maximum Series 1997-2 Purchaser Invested Amount. Notwithstanding
anything to the contrary contained in this Supplement, at no time shall the
Series 1997-2 Purchaser Invested Amount (calculated without regard to clauses
(d) and (e) of the definition thereof) of any Purchaser exceed such Purchaser's
Commitment at such time.
SECTION 2.04. Delivery. On the Issuance Date, the Company shall sign
on behalf of the Trust and shall direct the Trustee in writing pursuant to
Section 5.02 of the Agreement to duly authenticate, and the Trustee, upon
receiving such direction, shall so authenticate the VFC Certificates in such
names and such denominations and deliver such VFC Certificates to the Initial
Purchasers in accordance with such written directions. The Trustee shall mark on
its books the actual Series 1997-2 Invested Amount and Series 1997-2
Subordinated Interest Amount outstanding on any date of determination, which,
absent manifest error, shall constitute prima facie evidence of the outstanding
Series 1997-2 Invested Amount and Series 1997-2 Subordinated Interest Amount
from time to time.
SECTION 2.05. Procedure for Initial Issuance and for Increasing the
Series 1997-2 Invested Amount. (a) Subject to subsection 2.05(b), on any
Business Day during the Commitment Period, each Purchaser agrees that the Series
1997-2 Invested Amount may be increased by increasing each Purchaser's Series
1997-2 Purchaser Invested Amount (an "Increase"), up to an amount not exceeding
each Purchaser's Commitment, upon the request of the Master Servicer or the
Company on behalf of the Trust (each date on which an increase in the Series
1997-2 Invested Amount occurs
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Series 1997-2 Supplement
hereunder being herein referred to as the "Increase Date" applicable to such
Increase); provided, however, that the Master Servicer or the Company, as the
case may be, shall have given the Agent irrevocable written notice (effective
upon receipt), substantially in the form of Exhibit F hereto, of such request no
later than (i) if the Initial Series 1997-2 Invested Amount or Increase Amount
is to be priced solely with reference to the ABR, 1:00 p.m., New York City time,
on the Issuance Date or such Increase Date, as the case may be, or (ii) if all
or a portion of the Initial Series 1997-2 Invested Amount or Increase Amount is
to be allocated to a Eurodollar Tranche, 1:00 p.m., New York City time, three
Business Days prior to the Issuance Date or such Increase Date, as the case may
be; provided further that the provisions of this subsection shall not restrict
the allocations of Collections pursuant to Article III. Such notice shall state
(x) the Issuance Date or the Increase Date, as the case may be; (y) the Initial
Series 1997-2 Invested Amount or the proposed amount of such Increase (the
"Increase Amount"), as the case may be; and (z) what portions thereof will be
allocated to a Eurodollar Tranche and the Floating Tranche. No Purchaser shall
be obligated to fund any such Increase, unless concurrently with any such
Increase in the Series 1997-2 Invested Amount, the Series 1997-2 Subordinated
Interest Amount shall be increased by an amount (the "Series 1997-2 Subordinated
Interest Increase Amount") such that after giving effect to such increase, the
Series 1997-2 Adjusted Invested Amount plus the Series 1997-2 Subordinated
Interest Amount equals the Series 1997-2 Target Receivables Amount.
(b) The Purchasers shall not be required to make the initial
purchase of VFC Certificates on the Issuance Date or to increase their
respective Series 1997-2 Invested Amounts on any Increase Date hereunder unless:
(i) the related aggregate initial purchase amount or Increase Amount
is equal to (A) in the case of a Floating Tranche, $100,000 or an integral
multiple of $100,000 in excess thereof and (B) in the case of a
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Series 1997-2 Supplement
Eurodollar Tranche, $500,000 or an integral multiple of $500,000 in excess
thereof;
(ii) after giving effect to the initial purchase amount or Increase
Amount, (A) the Series 1997-2 Invested Amount (calculated without regard
to clauses (d) and (e) of the definition of Series 1997-2 Purchaser
Invested Amount) would not exceed the Maximum Commitment Amount on the
Issuance Date or such Increase Date, as the case may be, and (B) the
Series 1997-2 Allocated Receivables Amount would not be less than the
Series 1997-2 Target Receivables Amount on the Issuance Date or such
Increase Date, as the case may be; and
(iii) no Early Amortization Event or Potential Early Amortization
Event shall have occurred and be continuing.
(c) After receipt by the Agent of the notice required by subsection
2.05(a) from the Master Servicer or the Company on behalf of the Trust, the
Agent shall, so long as the conditions set forth in subsections 2.05(a) and (b)
are satisfied, promptly provide telephonic notice to each Purchaser of the
Increase Date and of the portion of the Increase Amount allocable to such
Purchaser (which shall equal such Purchaser's Commitment Percentage of the
Increase Amount). The Master Servicer shall promptly notify the Company of the
Increase Date and the amount of the Series 1997-2 Subordinated Interest Increase
Amount. Each Purchaser agrees to pay in immediately available funds such
Purchaser's Commitment Percentage of each Increase on the related Increase Date
to the Agent for payment to the Trust.
SECTION 2.06. Procedure for Decreasing the Series 1997-2 Invested
Amount; Optional Termination. (a) On any Business Day during the Series 1997-2
Revolving Period or the Series 1997-2 Amortization Period (except for
Distribution Dates during the Series 1997-2 Amortization Period (which shall be
governed by subsection 3A.06(c))), upon the written request of the Master
Servicer or the
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Series 1997-2 Supplement
Company on behalf of the Trust, the portion of the Series 1997-2 Invested Amount
not allocated to a Eurodollar Tranche may be reduced (a "Decrease") by the
distribution by the Trustee to the Agent for the pro rata benefit of the
Purchasers in accordance with their Commitment Percentages of some or all of the
funds on deposit in the Series 1997-2 Principal Collection Sub-subaccount on
such day; provided that the Master Servicer shall have given the Agent and the
Trustee irrevocable written notice (effective upon receipt), prior to 1:00 p.m.,
New York City time, on the Business Day of such Decrease and which notice shall
state the amount of such Decrease; provided further that such Decrease shall be
in an amount equal to $100,000 and integral multiples of $100,000 in excess
thereof; provided further, however, that no prepayment of any Eurodollar Tranche
prior to the termination of a Eurodollar Period may occur unless, concurrently
with such prepayment, the Sellers shall have paid to the Purchasers any amounts
due and payable pursuant to Section 7.04.
(b) Simultaneously with any such Decrease during the Series 1997-2
Revolving Period, the Series 1997-2 Subordinated Interest Amount shall be
reduced by an amount (the "Series 1997-2 Subordinated Interest Reduction
Amount") such that the Series 1997-2 Subordinated Interest Amount shall equal
the Series 1997-2 Required Subordinated Amount after giving effect to such
Decrease. During the Series 1997-2 Revolving Period, after the distribution
described in subsection (a) above has been made, and the Series 1997-2
Subordinated Interest Amount shall have been reduced by the Series 1997-2
Subordinated Interest Reduction Amount, a distribution shall be made to the
holder of the Series 1997-2 Subordinated Interest out of remaining funds on
deposit in the Series 1997-2 Principal Collection Sub- subaccount in an amount
equal to the lesser of (x) the Series 1997-2 Subordinated Interest Reduction
Amount and (y) the amount of such remaining funds on deposit in the Series
1997-2 Principal Collection Sub-subaccount.
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Series 1997-2 Supplement
(c) Any reduction in the Series 1997-2 Invested Amount on any
Business Day shall be allocated first to reduce the Available Pricing Amount.
(d) (i) On any Business Day to occur following the second
anniversary of the Issuance Date and prior to the occurrence of the Scheduled
Revolving Termination Date, an Early Amortization Event or Potential Early
Amortization Event, the Company shall have the right to deliver an irrevocable
notice (an "Optional Termination Notice") to the Trustee and the Master Servicer
in which the Company declares that the Series 1997-2 Revolving Period shall
terminate on the date (the "Optional Termination Date") set forth in such notice
(which date, in any event, shall not be less than 10 days from the date on which
such notice is delivered).
(ii) From and after the Optional Termination Date, the Series 1997-2
Amortization Period shall commence for all purposes under this Agreement and the
other Transaction Documents. The Trustee shall give prompt written notice of its
receipt of an Optional Termination Notice to the Purchasers and each Rating
Agency.
SECTION 2.07. Reductions of the Commitments. (a) On any Business Day
during the Series 1997-2 Revolving Period, the Company, on behalf of the Trust,
may, upon three Business Days prior written notice (effective upon receipt)
reduce or terminate the Commitments (a "Commitment Reduction") in an aggregate
amount equal to $5,000,000 or a whole multiple of $5,000,000 in excess thereof;
provided that no such termination or reduction shall be permitted if, after
giving effect thereto and to any reduction in the Series 1997-2 Invested Amount
(calculated without regard to clauses (d) and (e) of the definition of Series
1997-2 Purchaser Invested Amount) on such date, the Series 1997-2 Invested
Amount would exceed the Commitment Amount then in effect. Each Purchaser's
Commitment shall be reduced by such Purchaser's Commitment Percentage of the
amount of such Commitment Reduction.
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Series 1997-2 Supplement
(b) Once reduced, the Commitments may not be subsequently
reinstated. Upon effectiveness of any such reduction, the Agent shall prepare a
revised Schedule 1 to reflect the reduced Commitment of each Purchaser and
Schedule 1 of this Supplement shall be deemed to be automatically superseded by
such revised Schedule 1. The Agent shall distribute such revised Schedule 1 to
the Company, the Master Servicer, the Trustee and each Purchaser.
SECTION 2.08. Interest; Commitment Fee. (a) Interest shall be
payable on the VFC Certificates on each Distribution Date pursuant to subsection
3A.06(a).
(b) The Trustee (acting at the written direction of the Master
Servicer) shall pay to the Agent, for the pro rata account of the Purchasers in
accordance with their Commitment Percentages, on each Distribution Date, a
commitment fee with respect to each Accrual Period or portion thereof ending on
such date (the "Commitment Fee") during the Series 1997-2 Revolving Period at a
rate equal to 1/2% per annum of the average daily excess of the Aggregate
Commitment Amount over the average Series 1997-2 Invested Amount during such
Accrual Period; provided that, for purposes of calculating clause (b) of the
Accrued Expense Amount on any date of determination and clause (a)(i) of the
Accrued Expense Adjustment for purposes of clause (A) of the proviso to
subsection 3A.03(a)(i) of this Supplement, as they relate to the Commitment Fee,
it will be assumed that the average Series 1997-2 Invested Amount during the
relevant Accrual Period is equal to zero. The Commitment Fee shall be payable
(a) monthly in arrears on each Distribution Date, (b) on the Commitment
Termination Date and (c) the Optional Termination Date. To the extent that funds
on deposit in the Series 1997-2 Accrued Interest Sub- subaccount and the Series
1997-2 Non-Principal Collection Sub-subaccount at any such date are insufficient
to pay the Commitment Fee due on such date, the Trustee shall so notify the
Company and the Company shall immediately pay the Agent the amount of any such
deficiency. The Trustee shall not be
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Series 1997-2 Supplement
liable for the payment of the Commitment Fee from its own funds.
(c) Calculations of per annum rates and fees under this Supplement
shall be made on the basis of a 365- day year with respect to Commitment Fees,
other fees, and, except with respect to Eurodollar Tranches, interest rates.
Each determination of One-Month LIBOR by the Agent shall be conclusive and
binding upon each of the parties hereto in the absence of manifest error.
SECTION 2.09. Indemnification by the Company and the Master
Servicer. (a) The Company agrees to indemnify and hold harmless the Agent, each
Purchaser and each of their respective officers, directors, agents and employees
(each, a "Company Indemnified Person") from and against any loss, liability,
expense, damage or injury (a "Claim") suffered or sustained by such Company
Indemnified Person by reason of (i) any acts, omissions or alleged acts or
omissions arising out of, or relating to, activities of the Company pursuant to
any Pooling and Servicing Agreement or the other Transaction Documents to which
it is a party, (ii) in the case of a Claim brought by a third party, a breach of
any representation or warranty made or deemed made by the Company (or any of its
officers), except to the extent that such Company Indemnified Person would be
indemnified and held harmless by an adjustment payment in respect of Ineligible
Receivables pursuant to Section 2.05 of the Agreement or (iii) in the case of
Claim brought by a third party, a failure by the Company to comply with any
applicable law or regulation or to perform its covenants, agreements, duties or
obligations required to be performed or observed by it in accordance with the
provisions of any Pooling and Servicing Agreement or the other Transaction
Documents including but not limited to any judgment, award settlement,
reasonable attorneys' fees and other reasonable costs or expenses incurred in
connection with the defense of any actual or threatened action, proceeding or
claim, except to the extent such loss, liability, expense, damage or injury
resulted from the gross negligence, bad faith or
<PAGE>
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Series 1997-2 Supplement
wilful misconduct of such Company Indemnified Person or its officers, directors,
agents, principals, employees or employers; provided, however, that any payments
made by the Company pursuant to this subsection shall be Company Subordinated
Obligations.
(b) The Master Servicer agrees to indemnify and hold harmless the
Agent, each Purchaser and each of their respective officers, directors, agents
and employees (each, a "Master Servicer Indemnified Person") from and against
any Claim by reason of (i) any acts, omissions or alleged acts or omissions
arising out of, or relating to, activities of the Master Servicer pursuant to
any Pooling and Servicing Agreement or the other Transaction Documents to which
it is a party, (ii) in the case of a Claim brought by a third party, a breach of
any representation or warranty made or deemed made by the Master Servicer or any
Servicer (or any of their respective officers) or (c) in the case of a Claim
brought by a third party, a failure by the Master Servicer or any Servicer to
comply with any applicable law or regulation or to perform its covenants,
agreements, duties or obligations required to be performed or observed by it in
accordance with the provisions of any Pooling and Servicing Agreement or the
other Transaction Documents including but not limited to any judgment, award,
settlement, reasonable attorneys fees and other reasonable costs or expenses
incurred in connection with the defense of any actual or threatened action,
proceeding or claim, except to the extent such loss, liability, expense, damage
or injury resulted from the gross negligence, bad faith or wilful misconduct of
such Master Servicer Indemnified Person or its officers, directors, agents,
principals, employees or employers.
ARTICLE III
Article III of the Agreement
SECTION 3.01 of the Agreement and each other section of Article III
of the Agreement relating to another
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Series 1997-2 Supplement
Series shall be read in its entirety as provided in the Agreement. Article III
of the Agreement (except for Section 3.01 thereof and any portion thereof
relating to another Series) shall read in its entirety as follows and shall be
exclusively applicable to Series 1997-2:
SECTION 3A.02. Establishment of Trust Accounts. (a) The Trustee
shall cause to be established and maintained in the name of the Trustee, on
behalf of the Trust, (i) for the benefit of the Purchasers and (ii) in the case
of clauses (A) and (B) below, for the benefit (subject to the prior and senior
interest of the Purchasers) of the holder of the Series 1997-2 Subordinated
Interest, (A) a subaccount of the Collection Account (the "Series 1997-2
Collection Subaccount"), which subaccount is the Series Collection Subaccount
with respect to Series 1997-2; (B) two subaccounts of the Series 1997-2
Collection Subaccount: (1) the Series 1997-2 Principal Collection Sub-
subaccount and (2) the Series 1997-2 Non-Principal Collection Sub-subaccount
(respectively, the "Series 1997-2 Principal Collection Sub-subaccount" and the
"Series 1997-2 Non-Principal Collection Sub-subaccount"), and (C) a subaccount
of the Series 1997-2 Non-Principal Collection Sub-subaccount (the "Series 1997-2
Accrued Interest Sub- subaccount"; all accounts established pursuant to this
subsection 3A.02(a) and listed on Schedule 2, collectively, the "Trust
Accounts"), each Trust Account to bear a designation indicating that the funds
deposited therein are held for the benefit of the Persons (and, for each such
Person, to the extent) set forth in clauses (i) and (ii) above. The Trustee, on
behalf of the Holders, shall possess all right, title and interest in all funds
from time to time on deposit in, and all Eligible Investments credited to, the
Trust Accounts and in all proceeds thereof. The Trust Accounts shall be under
the sole dominion and control of the Trustee for the exclusive benefit of the
Persons (and, for each such Person, to the extent) set forth in clauses (i) and
(ii) above. In any case that the Company has not provided applicable written
direction as to Eligible Investments to the Trustee, the Trustee shall invest in
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Series 1997-2 Supplement
demand deposits or money market funds that constitute Eligible Investments.
(b) All Eligible Investments in the Trust Accounts shall be held by
the Trustee, on behalf of the Holders, for the benefit of the Purchasers and,
subject to the prior interest of the Purchasers, of the holder of the Series
1997-2 Subordinated Interest; provided, however, that funds on deposit in a
Trust Account that is a subaccount of the Collection Account shall, at the
direction of the Company, be invested together with funds held in other Sub-
subaccounts of the Collection Account. After giving effect to any distribution
to the Company pursuant to subsection 3A.03(b)(i), amounts on deposit and
available for investment in the Series 1997-2 Principal Collection Sub-
subaccount shall be invested by the Trustee at the written direction of the
Company in Eligible Investments that mature, or that are payable or redeemable
upon demand of the holder thereof, (i) in the case of any such investment made
during the Series 1997-2 Revolving Period, on or prior to the next Business Day
and (ii) in the case of any such investment made during the Series 1997-2
Amortization Period, on or prior to the Business Day immediately preceding the
next Distribution Date. Amounts on deposit and available for investment in the
Series 1997-2 Non- Principal Collection Sub-subaccount and the Series 1997-2
Accrued Interest Sub-subaccount shall be invested by the Trustee at the written
direction of the Company in Eligible Investments that mature, or that are
payable or redeemable upon demand of the holder thereof, on or prior to the
Business Day immediately preceding the subsequent Distribution Date. As of the
Business Day immediately preceding the Settlement Report Date, all interest and
other investment earnings (net of losses and investment expenses) on funds
deposited in the Series 1997-2 Accrued Interest Sub-subaccount shall be
deposited in the Series 1997-2 Non- Principal Collection Sub-subaccount. All
interest and investment earnings (net of losses and investment expenses) on
funds deposited in the Series 1997-2 Principal Collection
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Series 1997-2 Supplement
Sub-subaccount shall be deposited in the Series 1997-2 Non- Principal Collection
Sub-subaccount.
SECTION 3A.03. Daily Allocations. (a) The portion of the Aggregate
Daily Collections allocated to Series 1997-2 pursuant to Article III of the
Agreement shall be allocated and distributed as set forth in this Article III by
the Trustee based solely on the information provided it by the Master Servicer
in the Daily Report (upon which the Trustee may conclusively rely, subject to
its obligation to perform the procedures set forth in the Internal Operating
Procedures Memorandum):
(i) on each Business Day, an amount equal to the Accrued Expense
Amount for such day (or, during the Series 1997-2 Revolving Period, such
greater amount as the Company may request in writing) shall be transferred
from the Series 1997-2 Collection Subaccount to the Series 1997-2
Non-Principal Collection Sub-subaccount; provided, that (A) on the tenth
Business Day of each Accrual Period (and each Business Day thereafter, if
necessary, until the full amount of any positive Accrued Expense
Adjustment is transferred), (B) on the day of any Increase (and each
Business Day thereafter, if necessary, until the full amount of any
positive Accrued Expense Adjustment is transferred), (C) on the day of any
Decrease and (D) on the last Business Day of each Accrual Period, an
amount equal to the Accrued Expense Adjustment shall, if such adjustment
is a positive amount, be transferred from the Series 1997-2 Collection
Subaccount to the Series 1997-2 Non-Principal Collection Sub-subaccount
or, if such adjustment is a negative amount, be transferred from the
Series 1997-2 Non-Principal Collection Sub-subaccount to the Series 1997-2
Collection Subaccount (or deducted from the transfer in respect of the
Accrued Expense Amount for such day); and
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Series 1997-2 Supplement
(ii) on each Business Day (including Distribution Dates), following
the transfers pursuant to clause (i) above, any remaining funds on deposit
in the Series 1997-2 Collection Subaccount shall be transferred by the
Trustee to the Series 1997-2 Principal Collection Sub-subaccount.
(b) (i) On each Business Day during the Series 1997-2 Revolving
Period (including Distribution Dates), after giving effect to all allocations of
Aggregate Daily Collections referred to in subparagraphs (a)(i) and (a)(ii) on
such Business Day, amounts on deposit in the Series 1997-2 Principal Collection
Sub-subaccount (including any amounts transferred thereto to subsection
3A.03(c)(i) of the Series 1997-1 Supplement) shall be distributed by the
Trustee, based solely on the information provided to the Trustee by the Master
Servicer in the Daily Report (upon which the Trustee may conclusively rely,
subject to its obligation to perform the procedures set forth in the Internal
Operating Procedures Memorandum), (A) first, to pay Excess Program Costs and (B)
second, to the Company (but only to the extent that the Trustee has received a
Daily Report which reflects the receipt of the Collections on deposit therein)
in accordance with directions contained in the Daily Report or to such accounts
or such persons as the Company may direct in writing (which directions may
consist of standing instructions provided by the Company that shall remain in
effect until changed by the Company in writing); provided that such distribution
shall be made only if no Early Amortization Event or Potential Early
Amortization Event relating to an Early Amortization Event set forth in
subsections (a), (d) (but only with respect to a Servicer Default set forth in
subsection 6.01(e) of the Servicing Agreement relating to the Master Servicer or
to one or more Servicers that are responsible for servicing Receivables
representing 15% or more of the Aggregate Receivables Amount), (g), (j) or (k)
of Section 5.01 of this Supplement has occurred and is continuing and only to
the extent that if, after giving effect to such distribution, the Series 1997-2
Target Receivables Amount would not exceed the
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Series 1997-2 Supplement
Series 1997-2 Allocated Receivables Amount; provided further that if the Company
or the Master Servicer, on behalf of the Company, shall have given the Agent and
the Trustee irrevocable written notice (effective upon receipt) at least one
Business Day prior to such day (or, in the case of the Floating Tranche, notice
may be given on such day), the Company or the Master Servicer may instruct the
Trustee in writing (specifying the related amount) to withdraw all or a portion
of such amounts on deposit in the Series 1997-2 Principal Collection
Sub-subaccount (including any amounts transferred thereto pursuant to subsection
3A.03(c)(i) of the Series 1997-1 Supplement) and apply such withdrawn amounts
toward the reduction of the Series 1997-2 Invested Amount and the Series 1997-2
Subordinated Interest Amount in accordance with Section 2.06. Amounts
distributed to the Company hereunder shall be deemed to be paid first from
Collections received directly by the Master Servicer and second from Collections
received in the Lockboxes.
(ii) During the Series 1997-2 Amortization Period, amounts on
deposit in the Series 1997-2 Principal Collection Sub-subaccount on each
Distribution Date shall be distributed on such Distribution Date in accordance
with subsection 3A.06(c). No amounts on deposit in the Series 1997-2 Principal
Collection Sub-subaccount shall be distributed by the Trustee to the Company or
the holder of the Series 1997-2 Subordinated Interest during the Series 1997-2
Amortization Period.
(c) On each Business Day, an amount equal to the Daily Interest
Deposit for such day shall be transferred by the Trustee, based solely on the
information provided to the Trustee by the Master Servicer in the Daily Report
(upon which the Trustee may conclusively rely, subject to its obligation to
perform the procedures set forth in the Internal Operating Procedures
Memorandum), from the Series 1997-2 Non-Principal Collection Sub-subaccount to
the Series 1997-2 Accrued Interest Sub-subaccount provided, that, on each
Business Day that a transfer of funds is required to be made in respect of an
Accrued Expense
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Series 1997-2 Supplement
Adjustment pursuant to the further proviso to subsection 3A.03(a)(i), an amount
equal to the Daily Interest Adjustment shall, if such adjustment is a positive
amount, be transferred from the Series 1997-2 Non-Principal Collection
Sub-subaccount to the Series 1997-2 Accrued Interest Sub-subaccount or, if such
adjustment is a negative amount, be transferred from the Series 1997-2 Accrued
Interest Sub-subaccount to the Series 1997-2 Non-Principal Collection
Sub-subaccount (or deducted from the transfer in respect of the Daily Interest
Deposit for such day).
(d) The allocations to be made pursuant to this Section 3A.03 are
subject to the provisions of Sections 2.05, 2.06, 7.02, 9.01 and 9.04 of the
Agreement.
SECTION 3A.04. Determination of Interest. (a) (i) The amount of
interest distributable with respect to the VFC Certificates ("Series 1997-2
Monthly Interest Distribution") on each Distribution Date shall be the aggregate
amount of Daily Interest Expense accrued during the immediately preceding
Accrual Period.
(ii) Following any change in the amount of any Eurodollar Tranche or
Floating Tranche during an Accrual Period, the Series 1997-2 Monthly Interest
shall be calculated with respect to such changed amount for the number of days
in the Accrual Period during which such changed amount is outstanding.
(iii) If the Certificate Rate changes during any Accrual Period, the
Master Servicer shall amend the Monthly Settlement Statement to reflect the
adjustment in the Series 1997-2 Monthly Interest for such Accrual Period caused
by such change and any consequent adjustments and the Master Servicer shall also
provide written notification to the Trustee of any such change in the
Certificate Rate. Any amendment to the Monthly Settlement Statement pursuant to
this subsection 3A.04(a)(iii) shall be completed by 1:00 p.m. on the day
preceding the next Settlement Report Date.
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Series 1997-2 Supplement
(b) On each Distribution Date, the Master Servicer shall determine
the excess, if any (the "Interest Shortfall"), of (i) the aggregate Series
1997-2 Monthly Interest Distribution for the Accrual Period ending on such
Distribution Date over (ii) the amount that will be available to be distributed
to the Purchasers on such Distribution Date in respect thereof pursuant to this
Supplement. If the Interest Shortfall with respect to any Distribution Date is
greater than zero, an additional amount ("Additional Interest") equal to the
product of (A) the number of days until such Interest Shortfall shall be repaid
divided by 365, (B) the ABR and (C) such Interest Shortfall (or the portion
thereof that has not been paid to the Purchasers) shall be payable as provided
herein with respect to the VFC Certificates on each Distribution Date following
such Distribution Date to and including the Distribution Date on which such
Interest Shortfall is paid to the VFC Certificateholders.
(c) On any Business Day, the Company may, subject to subsection
3A.04(e), elect to allocate all or any portion of the Available Pricing Amount
to one or more Eurodollar Tranches with Eurodollar Periods commencing on such
Business Day by giving the Agent irrevocable written or telephonic (confirmed in
writing) notice thereof, which notice must be received by the Agent prior to
1:00 p.m., New York City time, three Business Days prior to such Business Day.
Such notice shall specify (i) the applicable Business Day, (ii) the Eurodollar
Period for each Eurodollar Tranche to which a portion of the Available Pricing
Amount is to be allocated and (iii) the portion of the Available Pricing Amount
being allocated to each such Eurodollar Tranche. Promptly upon receipt of each
such notice the Agent shall notify each Purchaser of the contents thereof. If
the Agent shall not have received timely notice as aforesaid with respect to all
or any portion of the Available Pricing Amount, the Monthly Interest Payment on
such amount shall be calculated by reference to the ABR.
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Series 1997-2 Supplement
(d) Any reduction in the Series 1997-2 Invested Amount on any
Business Day shall be allocated in the following order of priority:
first, to reduce the Unallocated Balance, as appropriate; and
second, to reduce the portion of the Series 1997-2 Invested Amount
allocated to Eurodollar Tranches in such order as the Company may select
in order to minimize costs payable pursuant to Section 7.04.
(e) Notwithstanding anything to the contrary contained in this
Section 3A.04, (i) the portion of the Series 1997-2 Invested Amount allocable to
each Eurodollar Tranche must be in an amount equal to $500,000 or an integral
multiple of $500,000 in excess thereof; (ii) no more than five Eurodollar
Tranches shall be outstanding at any one time; (iii) after the occurrence and
during the continuance of any Early Amortization Event or Potential Early
Amortization Event relating to an Early Amortization Event set forth in
subsections (a), (d) (but only with respect to a Servicer Default set forth in
subsection 6.01(e) of the Servicing Agreement), (e), (g) or (j) of Section 5.01
of this Supplement, the Company, may not elect to allocate any portion of the
Available Pricing Amount to a Eurodollar Tranche; and (iv) after the end of the
Series 1997-2 Revolving Period, the Company may not select any Eurodollar Period
that does not end on or prior to the next succeeding Distribution Date.
SECTION 3A.05. Determination of Series 1997-2 Monthly Principal. (a)
Payments of Series 1997-2 Principal. The amount (the "Series 1997-2 Monthly
Principal Payment") distributable from the Series 1997-2 Principal Collection
Sub-subaccount on each Distribution Date during the Series 1997-2 Amortization
Period shall be equal to the amount on deposit in such account on the
immediately preceding Settlement Report Date; provided, however, that the Series
1997-2 Monthly Principal Payment on any
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Series 1997-2 Supplement
Distribution Date shall not exceed the Series 1997-2 Invested Amount on such
Distribution Date after giving effect to the reductions and increases pursuant
to paragraphs (b) and (c) below. Further, on any other Business Day during the
Series 1997-2 Amortization Period, funds may be distributed from the Series
1997-2 Principal Collection Sub-subaccount to the Purchasers in accordance with
Section 2.06 of this Supplement.
(b) Reductions to Series 1997-2 Principal. If, on any Special
Allocation Settlement Report Date, the Series 1997-2 Allocable Charged-Off
Amount is greater than zero for the related Settlement Period, the Trustee shall
(in accordance with the written directions of the Master Servicer upon which the
Trustee may conclusively rely) make the following applications of such amounts
in the following order of priority:
(i) the Series 1997-2 Required Subordinated Amount shall be reduced
(but not below zero) by an amount equal to the Series 1997-2 Allocable
Charged-Off Amount (which shall also be reduced by the amount so applied);
(ii) then, to the extent that the Series 1997-2 Allocable
Charged-Off Amount is greater than zero following the application in
clause (i) above, the Series 1997-2 Invested Amount shall be reduced (but
not below zero) by such remaining Series 1997-2 Allocable Charged-Off
Amount (which shall also be reduced by the amount so applied).
(c) Increases to Series 1997-2 Principal. If, on any Special
Allocation Settlement Report Date, the Series 1997-2 Allocable Recoveries Amount
is greater than zero for the related Settlement Period, the Trustee shall (in
accordance with written directions from the Master Servicer upon which the
Trustee may conclusively rely, subject to its obligation to perform the
procedures set forth in the Internal Operating Procedures Memorandum) make the
following applications (after giving effect to the
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Series 1997-2 Supplement
applications in paragraph (b) of such amount in the following order of
priority):
(i) the Series 1997-2 Invested Amount shall be increased (but only
to the extent of any previous reductions of the Series 1997-2 Invested
Amount pursuant to subsection 3A.05(b)(ii)) by the amount of the Series
1997-2 Allocable Recoveries Amount (which shall also be reduced by the
amount so applied);
(ii) then, to the extent that the Series 1997-2 Allocable Recoveries
Amount is greater than zero following the applications in clause (i)
above, the Series 1997-2 Required Subordinated Amount shall be increased
(but only to the extent of any previous reductions of the Series 1997-2
Required Subordinated Amount pursuant to subsection 3A.05(b)(i)) by such
remaining Series 1997-2 Allocable Recoveries Amount (which shall also be
reduced by the amount so applied).
SECTION 3A.06. Applications. (a) The Trustee shall distribute, based
solely on the information provided to the Trustee by the Master Servicer in the
Monthly Settlement Statement (upon which the Trustee may conclusively rely,
subject to its obligation to perform the procedures set forth in the Internal
Operating Procedures Memorandum), on each Distribution Date, from amounts on
deposit in the Series 1997-2 Accrued Interest Sub- subaccount, an amount equal
to the Series 1997-2 Monthly Interest Distribution payable on such Distribution
Date (such amount, the "Monthly Interest Payment"), plus the amount of any
Monthly Interest Payment previously due but not distributed to the Purchasers on
a prior Distribution Date, plus the amount of any Additional Interest for such
Distribution Date and any Additional Interest previously due but not distributed
to the Purchasers on a prior Distribution Date, to the Purchasers.
(b) On each Distribution Date, the Trustee shall, based solely on
the information provided to the Trustee by
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Series 1997-2 Supplement
the Master Servicer in the Daily Report (upon which the Trustee may conclusively
rely, subject to its obligation to perform the procedures set forth in the
Internal Operating Procedures Memorandum), apply funds on deposit in the Series
1997-2 Non-Principal Collection Sub-subaccount in the following order of
priority to the extent funds are available:
(i) an amount equal to the Series 1997-2 Monthly Servicing Fee for
the Accrual Period ending on such Distribution Date shall be withdrawn
from the Series 1997-2 Non-Principal Collection Sub-subaccount by the
Trustee and paid to the Master Servicer (less any amounts payable to the
Trustee pursuant to Section 8.05 of the Agreement which shall be paid to
the Trustee); and
(ii) an amount equal to any Program Costs due and payable shall be
withdrawn from the Series 1997-2 Non- Principal Collection Sub-subaccount
by the Trustee and paid to the Persons owed such amounts.
Any remaining amounts on deposit in the Series 1997-2 Non- Principal Collection
Sub-subaccount (in excess of the Accrued Expense Amount as of such day) not
allocated pursuant to clauses (i) and (ii) above shall be paid to the holder of
the Series 1997-2 Subordinated Interest; provided, however, that during the
Series 1997-2 Amortization Period, such remaining amounts shall be deposited in
the Series 1997-2 Principal Collection Sub-subaccount for distribution in
accordance with subsection 3A.06(c).
(c) During the Series 1997-2 Amortization Period, the Trustee shall,
based solely on the information provided to the Trustee by the Master Servicer
in the Daily Report (upon which the Trustee may conclusively rely, subject to
its obligation to perform the procedures set forth in the Internal Operating
Procedures Memorandum), apply, on each
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Series 1997-2 Supplement
Distribution Date, amounts on deposit in the Series 1997-2 Principal Collection
Sub-subaccount in the following order of priority:
(i) if any amounts are owed to the Trustee or any other Person, on
account of Servicing Fees incurred in respect of the performance of its
responsibilities as Successor Master Servicer or Successor Servicer, as
the case may be, an amount equal to the product of (a) the amount so owed
to such Successor Master Servicer or Successor Servicer, as the case may
be, and (b) a fraction, the numerator of which shall be equal to the
Series 1997-2 Invested Amount as of the end of the immediately preceding
Settlement Period and the denominator of which shall be equal to the
Aggregate Invested Amount as of the end of the immediately preceding
Settlement Period shall be transferred from the Series 1997-2 Principal
Collection Sub-subaccount to the Trustee or such other Person;
(ii) following the repayment in full of all amounts set forth in
clause (i) above, an amount equal to the Series 1997-2 Monthly Principal
Payment for such Distribution Date shall be distributed from the Series
1997-2 Principal Collection Sub-subaccount to the Purchasers in reduction
of the Series 1997-2 Invested Amount;
(iii) if, following the repayment in full of all amounts set forth
in clauses (i) and (ii) above, any amounts are owed to the Trustee or any
other Person, on account of its fees, expenses and disbursements incurred
in respect of the performance of its responsibilities hereunder (other
than pursuant to clause (i) above capacity as Successor Master Servicer or
Successor), such amounts shall be transferred from the Series 1997-2
Principal Collection Sub-subaccount and paid to the Trustee or such other
Person; and
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Series 1997-2 Supplement
(iv) following the repayment in full of all amounts set forth in
clauses (i) through (iii) above, the remaining amount on deposit in the
Series 1997-2 Principal Collection Sub-subaccount on such Distribution
Date, if any, shall be distributed to the holder of the Series 1997-2
Subordinated Interest.
ARTICLE IV
Distributions and Reports
Article IV of the Agreement (except for any portion thereof relating
to another Series) shall read in its entirety as follows and the following shall
be exclusively applicable to the VFC Certificates issued pursuant to this
Supplement:
SECTION 4A.01. Distributions. (a) On each Distribution Date, the
Trustee shall distribute to each Purchaser from the account indicated in Article
III an amount equal to the product of (i) the amount to be distributed to the
Purchasers pursuant to Article III and (ii) such Purchaser's Commitment
Percentage.
(b) All allocations and distributions hereunder shall be in
accordance with the Daily Report and the Monthly Settlement Statement and shall
be made in accordance with the provisions of Section 11.04 hereof and subject to
Section 3.01(h) of the Agreement.
SECTION 4A.02. Daily Reports. The Master Servicer shall provide the
Agent and the Trustee with a Daily Report in accordance with subsection 4.02(a)
of the Servicing Agreement. The Agent shall make copies of the Daily Report
available to the Purchasers at their reasonable request at the Agent's office in
The City of New York.
SECTION 4A.03. Statements and Notices. (a) Monthly Settlement
Statements. On each Settlement
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Series 1997-2 Supplement
Report Date (commencing with the Settlement Report Date occurring in March
1997), the Master Servicer shall deliver to the Trustee and the Agent a Monthly
Settlement Statement in the Form of Exhibit E setting forth, among other things,
the Loss Reserve Ratio, the Dilution Reserve Ratio, the Minimum Ratio, the
Carrying Cost Reserve Ratio and the Servicing Reserve Ratio, each as
recalculated for the next succeeding Settlement Period. The Agent shall forward
a copy of each Monthly Settlement Statement to any Purchaser upon request by
such Purchaser. The Company and the Master Servicer will deliver copies of all
notices, reports (other than Daily Reports), statements and other documents
delivered by it pursuant to the Pooling and Servicing Agreements to each Rating
Agency.
(b) Annual Certificateholders' Tax Statement. On or before April 1
of each calendar year (or such earlier date as required by applicable law),
beginning with calendar year 1998, the Company on behalf of the Trustee shall
furnish, or cause to be furnished, to each Person who at any time during the
preceding calendar year was a Purchaser, a statement prepared by the Company
containing the aggregate amount distributed to such Person for such calendar
year or the applicable portion thereof during which such Person was a Purchaser,
together with such other information as is required to be provided by an issuer
of indebtedness under the Internal Revenue Code and such other customary
information as the Company deems necessary to enable the Purchasers to prepare
their tax returns. Such obligation of the Company shall be deemed to have been
satisfied to the extent that substantially comparable information shall have
been provided by the Trustee or the Agent pursuant to any requirements of the
Internal Revenue Code as from time to time in effect. The Trustee shall be under
no obligation to prepare tax returns for the Trust.
(c) Early Amortization Event/Distribution of Principal Notices. Upon
the occurrence of an Early Amortization Event with respect to the Series 1997-2,
the Company or the Master Servicer, as the case may be, shall
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Series 1997-2 Supplement
give prompt written notice thereof to the Trustee and the Agent. As promptly as
reasonably practicable after its receipt of notice of the occurrence of an Early
Amortization Event with respect to Series 1997-2, the Trustee shall give notice
(i) to each Rating Agency (which notice shall be given, by telephone or
otherwise, not later than the second Business Day after such receipt) and (ii)
to the Agent, who in turn shall give notice to each Purchaser. In addition, on
the Business Day preceding each day on which a distribution of principal is to
be made during the Series 1997-2 Amortization Period, the Master Servicer shall
direct the Agent to send notice to each Purchaser, which notice shall set forth
the amount of principal to be distributed on the related date to the Purchasers
with respect to the outstanding VFC Certificates.
ARTICLE V
Additional Early Amortization Events
SECTION 5.01. Additional Early Amortization Events. If any one of
the events specified in Section 7.01 of the Agreement (after any grace periods
or consents applicable thereto) or any one of the following events (each, an
"Early Amortization Event") shall occur during the Series 1997-2 Revolving
Period:
(a) (i) failure on the part of the Master Servicer to direct any
payment to be made, or failure of any payment to be made, in respect of
interest owing on any VFC Certificate or the Commitment Fee within two
Business Days of the date such interest or Commitment Fee is due or (ii)
failure on the part of the Master Servicer to direct any payment to be
made, or of the Company to make any payment in respect of any other
amounts owing by the Company, under any Pooling and Servicing Agreement to
or for the benefit of the Purchasers within five Business Days of the date
such other amount is due;
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Series 1997-2 Supplement
(b) failure on the part of the Company duly to observe or perform in
any material respect any covenant or agreement of the Company set forth in
any Pooling and Servicing Agreement (including each covenant contained in
Sections 2.07 and 2.08 of the Agreement) that continues unremedied 30 days
after the earlier of (i) the date on which a Responsible Officer of the
Company or, so long as the Master Servicer is an Affiliate of the Company,
a Responsible Officer of the Master Servicer has knowledge of such failure
and (ii) the date on which written notice of such failure, requiring the
same to be remedied, shall have been given to the Company by the Trustee,
or to the Company and the Trustee by the Agent or Purchasers evidencing
25% or more of the Series 1997-2 Invested Amount;
(c) any representation or warranty made or deemed made by the
Company in any Pooling and Servicing Agreement to or for the benefit of
the Purchasers shall prove to have been incorrect in any material respect
when made or when deemed made that continues to be incorrect 30 days after
the earlier of (i) the date on which a Responsible Officer of the Company
or, so long as the Master Servicer is an Affiliate of the Company, a
Responsible Officer of the Master Servicer has knowledge of such failure
and (ii) the date on which notice of such failure, requiring the same to
be remedied, shall have been given to the Company by the Trustee or to the
Company and the Trustee by the Agent or Purchasers evidencing 25% or more
of the Series 1997-2 Invested Amount and as a result of such
incorrectness, the interests, rights or remedies of the Purchasers have
been materially and adversely affected; provided, however, that an Early
Amortization Event with respect to Series 1997-2 shall not be deemed to
have occurred under this paragraph if the incorrectness of such
representation or warranty gives rise to an obligation to repurchase or
make an adjustment payment in respect of the related Receivables and the
Company has repurchased or made an adjustment payment in
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Series 1997-2 Supplement
respect of the related Receivable or all such Receivables, if applicable,
in accordance with the provisions of any Pooling and Servicing Agreement
within 10 Business Days of when the Company was obligated to do so;
(d) a Servicer Default with respect to (i) the Master Servicer,
other than any Servicer Default that is within subsection 5.01(a) above,
or (ii) one or more Servicers that are responsible for servicing
Receivables representing 15% or more of the Aggregate Receivables Amount
shall have occurred and be continuing;
(e) a Purchase Termination Event with respect to one or more Sellers
that are responsible for originating Receivables representing 5% or more
of the Aggregate Receivables Amount shall have occurred and be continuing;
(f) a Change in Control shall have occurred;
(g) the Series 1997-2 Allocated Receivables Amount shall be less
than the Series 1997-2 Target Receivables Amount for a period of five
consecutive Business Days;
(h) any of the Agreement, the Servicing Agreement, this Supplement
or the Receivables Sale Agreement shall cease, for any reason, to be in
full force and effect, or the Company, Master Servicer, any Servicer, any
Seller or any Affiliate thereof shall so assert in writing;
(i) the Trust shall for any reason cease to have a valid and
perfected first priority undivided ownership or first priority security
interest in any of the Trust Assets (subject to no other Liens other than
any Permitted Liens) and such cessation would, individually or together
with other cessations, have a Material Adverse Effect;
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Series 1997-2 Supplement
(j) a Federal tax notice of Lien, in an amount equal to or greater
than $1,000,000, shall have been filed against the Company or the Trust
unless there shall have been delivered to the Trustee and the Rating
Agencies proof of release of such Lien;
(k) a notice of Lien shall have been filed by the Pension Benefit
Guaranty Corporation against 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 unless there shall have been delivered
to the Trustee and the Rating Agencies proof of the release of such Lien;
(l) (i) one or more judgments for the payment of money (to the
extent not bonded or covered by insurance to the reasonable satisfaction
of the Agent) shall be rendered against the Company (A) in an aggregate
amount greater than $50,000 or (B) that, individually or in the aggregate,
have resulted or could reasonably be expected to result in a Company
Material Adverse Effect or (ii) one or more judgments for the payment of
money (to the extent not bonded or covered by insurance to the reasonable
satisfaction of the Agent) shall be rendered against the Master Servicer,
any Servicer, any Seller or any combination thereof (A) in an aggregate
amount greater than $7,500,000 or (B) that, individually or in the
aggregate, have resulted or could reasonably be expected to result in a
Servicer Material Adverse Effect or a Seller Material Adverse Effect, as
applicable, with respect to one or more Servicers or Sellers, as
applicable, that are responsible for servicing or originating, as the case
may be, 5% or more of the Aggregate Receivables Amount and, in either
case, the same shall remain undischarged for a period of 30 consecutive
days during which execution shall not be effectively stayed, or any action
shall be legally taken by a judgment creditor to
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Series 1997-2 Supplement
levy upon assets or properties of the Company, the Master Servicer, any
Servicer or any Seller to enforce any such judgment; or
(m) The Chase Manhattan Bank shall be a VFC Certificateholder or the
Agent under this Supplement as of May 5, 1997;
then, in the case of (x) any event described in Section 7.01 of the Agreement,
automatically without any notice or action on the part of the Trustee or
Purchasers, an early amortization period shall immediately commence or (y) any
event described above, after the applicable grace period (if any) set forth in
the applicable subsection, the Trustee may, and at the written direction of the
Majority Purchasers shall, by written notice then given to the Company and the
Master Servicer, declare that an early amortization period has commenced as of
the date of such notice with respect to Series 1997-2 (any such period under
clause (x) or (y) above, an "Early Amortization Period; provided, however, that
in the case of the event described in clause (g) above, if an Early Amortization
Period has not been declared within 10 Business Days from the occurrence of such
event, then an Early Amortization Period shall occur automatically unless, (i)
prior to the end of such 10 Business Day period, the Series 1997-2 Allocated
Receivables Amount shall no longer be less than the Series 1997-2 Target
Receivables Amount and (ii) so long as the Series 1997-2 Allocated Receivables
Amount continues to be equal to or greater than the Series 1997-2 Target
Receivables Amount, VFC Certificateholders evidencing 66-2/3% or more of the
Series 1997-2 Invested Amount shall have waived the occurrence of such event.
Notwithstanding the foregoing, a delay or failure in performance
referred to in clause (a) above for a period of five Business Days after the
applicable grace period, or in clause (b) above for a period of 30 Business Days
after the applicable grace period, will not constitute an Early Amortization
Event if such delay or failure could not have
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Series 1997-2 Supplement
been prevented by the exercise of reasonable diligence by the Company and such
delay or failure was caused by a Force Majeure Delay. The Company will
nevertheless be required to use its best efforts to perform its obligations in a
timely manner in accordance with the terms of the Transaction Documents, and the
Company shall promptly give the Trustee an Officer's Certificate notifying it of
any such delay or failure.
ARTICLE VI
Servicing Fee
SECTION 6.01. Servicing Compensation. A monthly servicing fee (the
"Series 1997-2 Monthly Servicing Fee") shall be payable to the Master Servicer
on each Distribution Date for the preceding Settlement Period, in an amount
equal to the product of (a) the Servicing Fee and (b) a fraction, the numerator
of which shall be equal to the Series 1997-2 Invested Amount as of the end of
the second preceding Settlement Period and the denominator of which shall be
equal to the Aggregate Invested Amount as of the end of such second preceding
Settlement Period; provided, however, that, for the purposes of calculating the
Accrued Expense Adjustment on the last Business Day of any Accrual Period, such
calculation shall be based on the Series 1997-2 Invested Amount and Aggregate
Invested Amount as of the end of the most recent Settlement Period that has
elapsed. To the extent that funds on deposit in the Series 1997-2 Non-Principal
Collection Sub-subaccount at any such date are insufficient to pay the Series
1997-2 Monthly Servicing Fee due on such date as set forth in the Monthly
Settlement Statement delivered by the Master Servicer to the Trustee, the
Trustee shall so notify the Company and the Company shall immediately pay the
Master Servicer the amount of any such deficiency.
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Series 1997-2 Supplement
ARTICLE VII
Change in Circumstances
SECTION 7.01. Illegality. Notwithstanding any other provision
herein, if, after the Issuance Date, the adoption of or any change in any
Requirement of Law or in the interpretation or administration thereof shall make
it unlawful for any Purchaser to make or maintain its portion of the VFC
Certificateholders' Interest in any Eurodollar Tranche and such Purchaser shall
notify the Agent, the Trustee and the Company, then the portion of each
Eurodollar Tranche applicable to such Purchaser shall thereafter be calculated
by reference to the ABR (such calculation shall be performed by the Master
Servicer). If any such change in the method of calculating interest occurs on a
day which is not the last day of the Eurodollar Period with respect to any
Eurodollar Tranche, the Company shall pay to the Agent for the account of such
Purchaser the amounts, if any, as may be required pursuant to Section 7.04.
SECTION 7.02. Requirements of Law. (a) Notwithstanding any other
provision herein, if after the Issuance Date the adoption of or any change in
any Requirement of Law or in the interpretation or application thereof or
compliance by any Purchaser with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:
(i) shall change the basis of taxation of payments to any Purchaser
in respect of the Transaction Documents (except for Excluded Taxes or
Non-Excluded Taxes described in Section 7.03); and
(ii) shall impose, modify or deem applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other
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Series 1997-2 Supplement
acquisition of funds by, any office of such Purchaser which is not
otherwise included in the determination of the Eurodollar Rate;
and the result of any of the foregoing is to increase the cost to such Purchaser
by an amount which such Purchaser deems to be material, of making, converting
into, continuing or maintaining Eurodollar Tranches or to reduce any amount
receivable hereunder in respect thereof, then, in any such case, the Company
will pay to such Purchaser upon demand such additional amount or amounts as will
compensate such Purchaser for such additional costs incurred or reduced amount
receivable.
(b) If any Purchaser shall have determined after the Issuance Date
that the adoption of or any change in any Requirement of Law regarding capital
adequacy or in the interpretation or application thereof or compliance by such
Purchaser or any corporation controlling such Purchaser with any request or
directive regarding capital adequacy (whether or not having the force of law)
from any Governmental Authority made subsequent to the date hereof shall have
the effect of reducing the rate of return on such Purchaser's or such
corporation's capital as a consequence of its obligations hereunder to a level
below that which such Lender or such corporation could have achieved but for
such adoption, change or compliance (taking into consideration such Purchaser's
or such corporation's policies with respect to capital adequacy) by an amount
deemed by such Lender to be material, then from time to time, the Company shall
promptly pay to such Purchaser such additional amount or amounts as will
compensate such Purchaser for such reduction.
(c) If any Purchaser becomes entitled to claim any additional
amounts pursuant to subsection (a) or (b) above, it shall promptly notify the
Company (with a copy to the Agent) of the event by reason of which it has become
so entitled. A certificate setting forth (i) any additional amounts payable
pursuant to this subsection and (ii) a
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reasonably detailed explanation of the calculation of such amount or amounts
submitted by such Purchaser to the Company (with a copy to the Agent) shall be
conclusive in the absence of manifest error. The agreements in this Section
shall survive the termination of this Supplement and the Agreement and the
payment of all amounts payable hereunder.
SECTION 7.03. Taxes. (a) All payments made by the Company under this
Supplement shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any Governmental
Authority, excluding (i) taxes imposed on the net income of the Agent or any
Purchaser, however denominated, and (ii) franchise taxes imposed on the net
income (or in lieu of net income) of the Agent or any Purchaser (the taxes
referred to in the foregoing clauses (i) and (ii) individually or collectively
being called "Excluded Taxes"), in each case imposed: (a) by the U.S. or any
political subdivision or taxing authority thereof or therein; (b) by any
jurisdiction under the laws of which the Agent or such Purchaser or lending
office is organized or in which its lending office or office is located, managed
or controlled or in which its principal office is located or any political
subdivision or taxing authority thereof or therein; or (c) by reason of any
connection between the jurisdiction imposing such tax and the Agent, such
Purchaser or such lending office other than a connection arising solely from the
Agreement or this Supplement or any transaction thereunder or hereunder (all
such non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities, collectively or individually, being called "Non-Excluded Taxes").
If any such Non-Excluded Taxes are required to be withheld from any amounts
payable to the Agent or any Purchaser hereunder, the amounts so payable to the
Agent or such Purchaser shall be increased to the extent necessary to yield to
the Agent or such Purchaser (after payment of all Non-Excluded Taxes) interest
or any such other amounts payable hereunder at the
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rates or in the amounts specified in this Supplement, provided, however, that
the Company shall not be required to increase any such amounts payable to any
Purchaser that is not organized under the laws of the United States of America
or a state thereof (i) if such Purchaser fails to comply with the requirements
of paragraph (b) of this subsection or (ii) to the extent that the obligation to
withhold amounts with respect to United States federal withholding tax existed
on the date such Purchaser became a Purchaser (or, in the case of payments to a
new lending office, on the date such Purchaser designated such new lending
office). Whenever any Non-Excluded Taxes are payable by the Company as promptly
as possible thereafter the Company shall send to the Agent for its own account
or for the account of such Purchaser, as the case may be, a certified copy of
any original official receipt received by the Company showing payment thereof or
any other proof reasonably acceptable to the Agent. If the Company fails to pay
any Non-Excluded Taxes when due to the appropriate taxing authority or fails to
remit to the Agent the required receipts or any other proof reasonably
acceptable to the Agent, the Company shall indemnify the Agent and the
Purchasers for any incremental taxes, interest or penalties that may become
payable by the Agent or any Purchaser as a result of any such failure. If the
Agent or any Purchaser shall become aware that it is entitled to receive a
refund or other tax credit or benefit in respect of any Non-Excluded Taxes, it
shall promptly notify the Company thereof and, in the case of a refund, shall
within 30 days after receipt of a request by the Company, apply for such refund
at the Company's expense; provided that the Agent or such Purchaser shall not be
required to do so if it determines in its reasonable judgment that it is not in
its interest to do so. If the Agent or any Purchaser receives a refund or other
tax credit or benefit in respect of any Non-Excluded Taxes for which the Company
has made a payment hereunder, it shall promptly notify the Company thereof and
shall promptly repay such refund or, in the case of a tax credit or other
benefit shall repay the amount of the tax credit or benefit received promptly
following the date on which such tax credit or
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other benefit is offset against such party's tax liability, in each case to the
Company without interest and net of any expenses incurred, except to the extent
interest shall have explicitly accompanied such refund or other tax credit or
benefit, provided that the Company, upon the request of such Purchaser or the
Agent, agrees to return the amount of such refund or other tax benefit or credit
(plus any penalties, interest or other charges required to be paid) to such
Purchaser or the Agent in the event such Purchaser or the Agent is required to
repay such amount to the relevant taxing authority. The agreements in this
subsection shall survive the termination of this Supplement and the repayment of
the Series 1997-2 Invested Amount and all other amounts payable hereunder.
(b) Each Purchaser that is not incorporated under the laws of the
United States of America or a state thereof shall:
(i) deliver to the Company, the Trustee and the Agent (A) two duly
completed copies of United States Internal Revenue Service Form 1001 or
4224, or successor applicable form, as the case may be, and (B) an
Internal Revenue Service Form W-8 or W-9, or successor applicable form, as
the case may be;
(ii) deliver to the Company, the Trustee and the Agent two further
copies of any such form or certification on or before the date that any
such form or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to the Company; and
(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by the Company or
the Agent;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has
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occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Purchaser from duly completing and delivering any such form with respect to it
and such Purchaser so advises the Company and the Agent. Each Purchaser so
incorporated shall certify to the Company, the Trustee and the Agent at the time
it first becomes a Purchaser, and thereafter to the extent provided by law, (i)
in the case of a Form 1001 or 4224, that it is entitled to receive payments
under this Agreement without, or at a reduced rate of, withholding of any United
States federal income taxes and (ii) in the case of a Form W-8 or W-9, that it
is entitled to an exemption from United States backup withholding tax. Each
Person that shall become a Purchaser or a Participant pursuant to subsection
11.10 shall, upon the effectiveness of the related transfer, be required to
provide to the Company, the Trustee and the Agent all of the forms and
statements required pursuant to this subsection, provided that in the case of a
Participant such Participant shall furnish all such required forms and
statements to the Purchaser from which the related participation shall have been
purchased.
SECTION 7.04. Indemnity. The Company and the Master Servicer jointly
and severally agree to indemnify each Purchaser and to hold each Purchaser
harmless from any loss or expense which such Purchaser may sustain or incur as a
consequence of (a) default by the Company in making a borrowing of, conversion
into or continuation of a Eurodollar Tranche after the Company has given
irrevocable notice requesting the same in accordance with the provisions of this
Supplement, or (b) default by the Company in making any prepayment in connection
with a Decrease after the Company has given irrevocable notice thereof in
accordance with the provisions of Section 2.06 of this Supplement or (c) the
making of a prepayment of a Eurodollar Tranche prior to the termination of the
Eurodollar Period for such Eurodollar Tranche. Such indemnification may include
an amount equal to the excess, if any, of (i) the amount of interest which would
have accrued on the amount so prepaid
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or not so borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
the Eurodollar Period (or in the case of a failure to borrow, convert or
continue, the Eurodollar Period that would have commenced on the date of such
prepayment or of such failure) in each case at the applicable rate of interest
for such Eurodollar Tranche provided for herein (excluding, however, the
Applicable Margin included therein, if any) over (ii) the amount of interest (as
reasonably determined by such Purchaser) which would have accrued to such
Purchaser on such amount by placing such amount on deposit for a comparable
period with leading banks in the interbank eurodollar market; provided that any
payments made by the Company pursuant to this Section shall be Company
Subordinated Obligations. This covenant shall survive the termination of this
Supplement and the payment of all amounts payable hereunder. A certificate as to
any additional amounts payable pursuant to the foregoing sentence submitted by
any Purchaser to the Company and the Servicer shall be conclusive absent
manifest error.
SECTION 7.05. Assignment of Commitments Under Certain Circumstances;
Duty to Mitigate. If (a)(i) any Purchaser delivers a notice described in Section
7.02 or (ii) the Company is required to pay any additional amount or
indemnification payment to any Purchaser pursuant to Sections 7.03 or 7.04, the
Company may, at its sole expense and effort (including with respect to the
processing and recordation fee referred to in subsection 11.10(b)), upon notice
to such Purchaser and the Agent, require such Purchaser to transfer and assign,
without recourse (in accordance with and subject to the restrictions contained
in Section 11.10), all of its interests, rights and obligations under this
Agreement to an assignee that shall assume such assigned obligations (which
assignee may be another Purchaser, if another Purchaser accepts such
assignment); provided that (A) such assignment shall not conflict with any law,
rule or regulation or order of any court or other Governmental Authority having
jurisdiction, (B) the Company
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shall have received the prior written consent of the Agent, which consent shall
not unreasonably be withheld, and (C) the Company or such assignee shall have
paid to the affected Purchaser in immediately available funds an amount equal to
the sum of the principal of, and interest accrued to the date of such payment
on, the outstanding VFC Certificates of such Purchaser plus all fees and other
amounts accrued for the account of such Purchaser hereunder (including any
amounts under Sections 7.02, 7.03 and 7.04); and provided further that, if prior
to any such transfer and assignment the circumstances or event that resulted in
such Purchaser's notice under Section 7.02 or the amounts paid pursuant to
Sections 7.03 or 7.04, as the case may be, cease to cause such Purchaser to
suffer increased costs or reductions in amounts received or receivable or
reduction in return on capital, or cease to have the consequences specified in
Section 7.02, or cease to result in amounts being payable under Sections 7.03 or
7.04, as the case may be (including as a result of any action taken by such
Purchaser pursuant to subsection 7.05(b) below), or if such Purchaser shall
withdraw its notice under Section 7.02 or shall waive its right to further
payments under Sections 7.03 or 7.04 in respect of such circumstances or event,
as the case may be, then such Purchaser shall not thereafter be required to make
any such transfer and assignment hereunder.
(b) If (i) any Purchaser delivers a notice described in Section 7.02
or (ii) the Company is required to pay any additional amount to any Purchaser
(or Transferee) , pursuant to Sections 7.03 or 7.04, then such Purchaser shall
use reasonable efforts (which shall not require such Purchaser to incur an
unreimbursed loss or unreimbursed cost or expense or otherwise take any action
inconsistent with its internal policies or legal or regulatory restrictions or
suffer any disadvantage or burden reasonably deemed by it to be significant) (A)
to file any certificate or document reasonably requested in writing by the
Company or (B) to assign its rights and delegate and transfer its obligations
hereunder to another of its offices, branches or affiliates, if such filing or
assignment would enable it to withdraw its
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notice pursuant to Section 7.02 or would reduce amounts payable pursuant to
Sections 7.03 or 7.04, as the case may be, in the future. The Company hereby
agrees to pay all reasonable costs and expenses incurred by any Purchaser in
connection with any such filing or assignment, delegation and transfer.
SECTION 7.06. Limitation. The obligations of the Company under this
Article VII shall be limited by Section 11.13.
ARTICLE VIII
Covenants, Representations and Warranties
SECTION 8.01. Representations and Warranties of the Company and the
Master Servicer. The Company and the Master Servicer each hereby represents and
warrants to the Trustee, the Agent and each of the Purchasers that each and
every of their respective representations and warranties contained in each
Pooling and Servicing Agreement is true and correct as of the Issuance Date and
as of the date of each Increase.
SECTION 8.02. Covenants of the Company and the Master Servicer. The
Company and the Master Servicer hereby agree, in addition to their obligations
under the Agreement and the Servicing Agreement, that:
(a) they shall not terminate the Agreement unless in compliance with
the terms of the Agreement and the supplements relating to each
Outstanding Series;
(b) they will (i) provide the Agent with evidence, satisfactory to
the Agent, of (A) the establishment of a disaster recovery plan, (B) the
establishment of computer back-up systems and (C) the operational
readiness of an off-site disaster recovery facility and (ii) deliver to
the Trustee executed copies of any
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landlord waivers, in a form reasonably acceptable to the Trustee, that may
be necessary to grant to the Trustee access to any leased premises of the
Master Servicer for which the Trustee may require access to perform the
collection and administrative functions to be performed by the Trustee
under the Transaction Documents;
(c) they shall observe in all material respects each and every of
their respective covenants (both affirmative and negative) contained in
the Agreement, the Servicing Agreement, this Supplement and all other
Transaction Documents to which each is a party;
(d) they shall afford the Agent or any representative of the Agent
access to all records relating to the Receivables at any reasonable time
during regular business hours, upon reasonable prior notice, for purposes
of inspection and shall permit the Agent or any representative of the
Agent to visit any of the Company's or the Master Servicer's, as the case
may be, offices or properties during regular business hours and as often
as may reasonably be requested, subject to the Company's or the Master
Servicer's, as the case may be, normal security and confidentiality
requirements and to discuss the business, operations, properties,
financial and other conditions of the Company or the Master Servicer with
their respective officers and employees and with their Independent Public
Accountants; provided that the Agent shall notify the Company or the
Master Servicer, as the case may be, prior to any contact with such
accountants and shall give the Company or the Master Servicer the
opportunity to participate in such discussions; and
(e) they shall not waive the provisions of subsections 7.01(d),
(e)(i) and (g) of the Receivables Sale Agreement without the consent of
the Agent.
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SECTION 8.03. Negative Covenant of the Company; Covenants of the
Master Servicer. (a) The Company shall not make any Restricted Payment while
Series 1997-2 is an Outstanding Series, except (i) from amounts distributed to
the Company pursuant to subsection 3A.03(b), (ii) in compliance with all terms
of the Transaction Documents, including the Company's covenant as to net worth
set forth in subsection 2.07(m) of the Agreement and (iii) such Restricted
Payment is made no more frequently than on a monthly basis and such Restricted
Payment is made in accordance with all corporate and legal formalities
applicable to the Company; provided that no Restricted Payment shall be made if
an Early Amortization Event has occurred and is continuing (or would occur as a
result of making such Restricted Payment).
(b) (i) The Master Servicer hereby agrees that it shall observe each
and all of its respective covenants (both affirmative and negative) contained in
each Pooling and Servicing Agreement in all material respects;
(ii) It shall provide to the Agent, simultaneously with delivery to
the Trustee or the Rating Agencies, all reports, notices, certificates,
statements and other documents required to be delivered to the Trustee or the
Rating Agencies pursuant to the Agreement, the Servicing Agreement and the other
Transaction Documents and furnish to the Agent promptly after receipt thereof a
copy of each material notice, material demand or other material communication
(excluding routine communications) received by or on behalf of the Company or
the Master Servicer with respect to the Transaction Documents; and
(iii) It shall provide notice to the Agent of the appointment of a
Successor Master Servicer pursuant to Section 6.02 of the Servicing Agreement.
SECTION 8.04. Obligations Unaffected. The obligations of the Company
and the Master Servicer to the Agent and the Purchasers under this Supplement
shall not be
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affected by reason of any invalidity, illegality or irregularity of any of the
Receivables or any sale of any of the Receivables.
SECTION 8.05. Representations and Warranties of the Initial
Purchasers and Acquiring Purchasers. Each Initial Purchaser and Acquiring
Purchaser represents, warrants and covenants to the Company, as of the Issuance
Date (or, in the case of each Acquiring Purchaser, as of the effective date of
the applicable Assignment and Assumption), that:
(a) It acknowledges that the VFC Certificates have not been and will
not be registered under the Securities Act and are being initially offered and
sold in reliance upon the exemption provided in Section 4(2) of the Securities
Act, and have not and will not be registered or qualified under the securities
or "blue sky" laws of any jurisdiction, and may not be resold or otherwise
transferred unless so registered or qualified or unless any exemption from such
requirements is available.
(b) It is purchasing the VFC Certificates in the ordinary course of
its business and for investment only solely for its own account or accounts for
which it exercises sole investment discretion and not as nominee or agent for
any other Person and not with a view to, or for offer or sale in connection
with, any distribution thereof (within to meaning of the Securities Act) that
would be in violation of the securities laws of the United States of America or
any state thereof.
(c) It is an institutional investor that is an "Accredited Investor"
(as defined under Rule 501(a)(1), (2), (3) or (7), of the Securities Act) or, if
the VFC Certificates are to be purchased for one or more institutional accounts
("investor accounts") for which it is acting as a fiduciary or agent, each such
investor account is an institutional investor that is an Accredited Investor.
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(d) It invests in or has such knowledge and experience in business
and financial matters and with respect to investments in securities so as to
enable it to understand and evaluate the risks of such investments and form an
investment decision with respect thereto and is able to bear the risk of such
investment for an indefinite period and to afford a complete loss thereof.
(e) It has been afforded access to information (including the
financial condition) about the Company and the Sellers to enable it to evaluate
its investment in the VFC Certificates (the "Information") and acknowledges that
it has been afforded the opportunity (i) to ask such questions as it has deemed
necessary of, and to receive answers from, representatives of the Company, the
Sellers or Persons acting on their behalf concerning the terms and conditions of
the offering of the VFC Certificates and the merits and risks of investing in
the VFC Certificates, (ii) to obtain such additional information that the
Company possesses or can acquire without unreasonable effort or expense that is
necessary to verify the accuracy and completeness of the Information and (iii)
to review, if applicable, the filings of the Sellers with the Securities and
Exchange Commission and all of the public disclosure of the Sellers.
(f) It acknowledges that it is the expressed intent of the Company
that the VFC Certificates are being issued only in transactions not involving
any public offering within the meaning of the Securities Act and that the VFC
Certificates will bear a legend substantially as set forth in the form of the
VFC Certificates included in this Supplement and will be subject to certain
limitations on transfer and exchange specified in the Agreement, this Supplement
and the other Transaction Documents.
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ARTICLE IX
Conditions Precedent
SECTION 9.01. Conditions Precedent to Effectiveness of Supplement.
This Supplement will become effective on the date (the "Effective Date") on
which the following conditions precedent have been satisfied:
(a) Transaction Documents. The Agent shall have received an original
copy for itself and photocopies for each Purchaser, each executed and delivered
in form and substance satisfactory to the Agent, of (i) the Agreement executed
by a duly authorized officer of each of the Company, the Master Servicer and the
Trustee, (ii) this Supplement executed by a duly authorized officer of each of
the Company, the Master Servicer, the Trustee, the Agent and the Initial
Purchasers and (iii) the other Transaction Documents duly executed by the
parties thereto.
(b) Corporate Documents; Corporate Proceedings of the Company and
Master Servicer. The Agent shall have received, with a copy for each Purchaser,
from the Company, each Seller and the Master Servicer, complete copies of:
(i) on or before the Effective Date, a copy of the By-laws delivered
to The Chase Manhattan Bank on August 5, 1996 pursuant to the Series
1996-A Supplement to the Pooling Agreement;
(ii) a copy of the certificate of incorporation including all
amendments thereto, of such Person, certified as of the date certified for
the closing of Series 1996-A, (unless there has been any amendment or
modification thereto since such time, in which case, certified as of a
recent date) by the Secretary of State or other appropriate authority of
the state of incorporation, as the case may be, and a certificate of
compliance, of status or of good standing, as and to
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the extent applicable, of each such Person as of a recent date, from the
Secretary of State or other appropriate authority of such jurisdiction;
(iii) a certificate of the Secretary or Assistant Secretary of such
Person dated the Effective Date and certifying (A) that the By-laws of
such Person delivered to The Chase Manhattan Bank on August 5, 1996,
pursuant to the Series 1996-A Supplement to the Pooling Agreement are
true, correct and in effect as of the Effective Date, (B) that attached
thereto is a true and complete copy of the resolutions of the Board of
Directors of such Person or committees thereof authorizing the execution,
delivery and performance of the Transaction Documents to which it is a
party and the transactions contemplated thereby, and in the case of the
Company, the execution, sale and delivery of the VFC Certificates, and
that such resolutions have not been amended, modified, revoked or
rescinded and are in full force and effect on the Effective Date, (C) that
the certificate of incorporation of such Person delivered to The Chase
Manhattan Bank on August 5, 1996, pursuant to the Series 1996-A Supplement
to the Pooling Agreement, is true, correct and in effect on the Effective
Date and has not been amended since the last amendment thereto shown on
the certificate of the Secretary of State of the state of incorporation of
such Person furnished pursuant to clause (ii) above and (D) as to the
incumbency and specimen signature of each officer executing any
Transaction Documents or any other document delivered in connection
herewith or therewith on behalf of such Person; and
(iv) a certificate of another officer as to the incumbency and
specimen signature of the Secretary or Assistant Secretary executing the
certificate pursuant to clause (iii) above.
(c) Good Standing Certificates. The Agent shall have received copies
of certificates of compliance, of
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status or of good standing, dated as of a recent date from the Secretary of
State or other appropriate authority of such jurisdiction, with respect to the
Company, the Master Servicer, each Servicer and each Seller, in each State where
the ownership, lease or operation of property or the conduct of business
requires it to qualify as a foreign corporation, except where the failure to so
qualify would not have a material adverse effect on the business, operations,
properties or condition (financial or otherwise) of the Company, the Master
Servicer, such Servicer or such Seller, as the case may be.
(d) Consents, Licenses, Approvals, Etc. The Agent shall have
received, with a photocopy for each Purchaser, certificates dated the Effective
Date of the President, Vice Chairman, Chief Financial Officer or any Vice
President of the Company, the Master Servicer, each Servicer and each Seller
either (i) attaching copies of all material consents, licenses and approvals
required in connection with the execution, delivery and performance by the
Company, the Master Servicer, such Servicer or such Seller, as the case may be,
of the Agreement, this Supplement, the Receivables Sale Agreement and/or the
Servicing Agreement, as the case may be, and the validity and enforceability of
the Agreement, this Supplement, the Receivables Sale Agreement and/or the
Servicing Agreement against the Company, the Master Servicer, such Servicer or
such Seller, as the case may be, and such consents, licenses and approvals shall
be in full force and effect or (ii) stating that no such consents, licenses or
approvals are so required, except those that may be required under state
securities or "blue sky" laws.
(e) Filings, Registrations and Recordings. Any documents (including,
without limitation, financing statements) required to be filed in order (i) to
perfect the sale of the Receivables by each Seller to the Company pursuant to
the Receivables Sale Agreement and (ii) to create, in favor of the Trustee, a
perfected ownership/perfected first security interest in the Trust
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Assets under the Agreement with respect to which an ownership/security interest
may be perfected by a filing under the UCC or other comparable statute shall, in
each case, have been properly prepared and filed in each office in each
jurisdiction where required pursuant to the Agreement or the Receivables Sale
Agreement, as the case may be, and such filings are the only filings required in
order to perfect the sale of the Receivables to the Company under the
Receivables Sale Agreement or to the Trust under the Agreement, as the case may
be. The Agent shall have received evidence reasonably satisfactory to it of each
such filing, registration or recordation and reasonably satisfactory evidence of
the payment of any necessary fee, tax or expense relating thereto.
(f) Lien Searches. The Agent and the Trustee shall have received the
results of a recent search satisfactory to the Agent of any UCC filings (or
equivalent filings) made with respect to the Company and the Sellers (and with
respect to such other Persons as the Agent deems necessary) in the states (or
other jurisdictions) in which the chief executive office of the Company, the
Sellers and each such other Person is located, any offices of the Company, the
Sellers and each such other Person in which records have been kept relating to
the Receivables and the other jurisdictions in which UCC filings (or equivalent
filings) were made pursuant to the preceding subsection, together with copies of
the financing statements (or similar documents) disclosed by such search, and
accompanied by evidence satisfactory to the Agent that any Liens disclosed by
such search would be Permitted Liens or have been released.
(g) Legal Opinions. The Agent, the Rating Agencies and the Trustee
shall have received, with a counterpart for each Purchaser, opinions (i) of
counsel to the Company, the Master Servicer, the Sellers and the Servicers,
dated the Issuance Date, as to corporate, tax, bankruptcy, perfection and other
matters, in form and substance acceptable to the Agent and its counsel and (ii)
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opinions of local counsel to the Company, the Master Servicer and each Seller,
dated the Issuance Date, as to certain corporate, state tax, perfection,
priority and other matters, in form and substance acceptable to the Agent and
its counsel.
(h) Fees. The Agent, the Initial Purchaser and the Trustee shall
have received payment of all fees and other amounts due and payable to any of
them on or before the Effective Date.
(i) Conditions Under the Receivables Sale Agreement. A Responsible
Officer of the Company shall have certified that all conditions to the
obligations of the Company and each of the Sellers under the Receivables Sale
Agreement shall have been satisfied in all material respects.
(j) Copies of Written Policies. The Agent and the Trustee shall have
received copies of the written Policies of the Sellers in form and substance
acceptable to the Agent.
(k) Insurance. The Agent and the Trustee shall have received
evidence satisfactory to the Agent of each Servicer's fidelity bond or other
coverage insuring against losses through wrongdoing of its officers and
employees who are involved in the servicing of Receivables, including coverage
of depositor's forgery, in an amount and breadth of coverage satisfactory to the
Rating Agencies and the Agent.
(l) Company's Board of Directors. The composition of the Company's
Board of Directors (including two independent directors) shall be reasonably
acceptable to the Agent.
(m) Financial Statements. The Agent and the Trustee shall have
received a pro forma balance sheet for the Company giving effect to all
transactions occurring on or before the Issuance Date. The Agent shall have
received
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the consolidated balance sheets and statements of income, stockholders' equity
and cash flows of the HFG Companies and their respective subsidiaries on a
consolidated basis (i) as of and for the fiscal year ended December 31, 1995,
audited by and accompanied by the opinion of Coopers & Lybrand LLP, independent
public accountants, and (ii) as of and for the fiscal quarters ended June 30,
1996 and September 30, 1996, certified by its chief financial officer.
(n) Solvency Certificate. The Agent and the Trustee shall have
received a certificate dated the Effective Date and signed by a Responsible
Officer of the Company, in form satisfactory to the Agent, to the effect that
the Company will be solvent after giving effect to the transactions occurring on
or before the Issuance Date.
(o) Representations and Warranties. The representations and
warranties of the Company and the Master Servicer in the Agreement and this
Supplement shall be true and correct in all material respects.
(p) Rating of VFC Certificates. The VFC Certificates shall have been
given a rating by S&P that is at least equal to "A".
ARTICLE X
The Agent
SECTION 10.01. Appointment. Each Purchaser hereby irrevocably
designates and appoints the Agent as the agent of such Purchaser under this
Supplement and each such Purchaser irrevocably authorizes the Agent, in such
capacity, to take such action on its behalf under the provisions of this
Supplement and to exercise such powers and perform such duties as are expressly
delegated to the Agent by the terms of this Supplement, together with such other
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary elsewhere in
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this Supplement, the Agent shall not have any duties or responsibilities, except
those expressly set forth herein, or any fiduciary relationship with any
Purchaser, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Supplement or otherwise exist
against the Agent.
SECTION 10.02. Delegation of Duties. The Agent may execute any of
its duties under this Supplement by or through agents or attorneys-in-fact and
shall be entitled to advice of counsel (who may be counsel for the Company or
the Master Servicer), independent public accountants and other experts selected
by it concerning all matters pertaining to such duties. The Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.
SECTION 10.03. Exculpatory Provisions. Neither the Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates
shall be (i) liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with the Agreement or this Supplement (x)
with the consent or at the request of the Majority Purchasers or (y) in the
absence of its own gross negligence or wilful misconduct or (ii) responsible in
any manner to any of the Purchasers for any recitals, statements,
representations or warranties made by the Company or any officer thereof
contained in this Supplement or any other Transaction Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agent under or in connection with, this Supplement or any
other Transaction Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Supplement or any other
Transaction Document or for any failure of the Company to perform its
obligations hereunder or thereunder. The Agent shall not be under any obligation
to any Purchaser to ascertain or to inquire as to the observance or performance
of any of the agreements contained in, or conditions of,
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this Supplement or any other Transaction Document, or to inspect the properties,
books or records of the Company.
SECTION 10.04. Reliance by Agent. The Agent shall be entitled to
rely, and shall be fully protected in relying, upon any VFC Certificate,
writing, resolution, notice, consent, certificate, affidavit, letter, telecopy,
telex or teletype message, statement, order or other documents or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Company or the Master Servicer),
independent accountants and other experts selected by the Agent and shall not be
liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts. The Agent
may deem and treat the payee of any VFC Certificate as the owner thereof for all
purposes unless a written notice of assignment, negotiation or transfer thereof
shall have been filed with the Agent. The Agent shall be fully justified in
failing or refusing to take any action under this Supplement or any other
Transaction Document unless it shall first receive such advice or concurrence of
the Majority Purchasers as it deems appropriate and it shall first be
indemnified to its satisfaction by the Purchasers against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action. The Agent shall in all cases be fully protected in acting,
or in refraining from acting, under this Supplement and the other Transaction
Documents in accordance with a request of the Majority Purchasers, and such
request and any action taken or failure to act pursuant thereto shall be
binding.
SECTION 10.05. Notice of Master Servicer Default or Early
Amortization Event or Potential Early Amortization Event. The Agent shall not be
deemed to have knowledge or notice of the occurrence of any Master Servicer
Default with respect to the Master Servicer or any Early Amortization Event or
Potential Early Amortization Event hereunder unless
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the Agent has received written notice from a Purchaser, the Company or the
Master Servicer referring to the Agreement or this Supplement, describing such
Master Servicer Default or Early Amortization Event or Potential Early
Amortization Event and stating that such notice is a "notice of a Master
Servicer Default with respect to the Master Servicer" or a "notice of an Early
Amortization Event or Potential Early Amortization Event", as the case may be.
In the event that the Agent receives such a notice, the Agent shall give notice
thereof to the Purchasers, the Trustee, the Company and the Master Servicer. The
Agent shall take such action with respect to such Master Servicer Default or
Early Amortization Event or Potential Early Amortization Event as shall be
reasonably directed by the Majority Purchasers; provided that unless and until
the Agent shall have received such directions and indemnification satisfactory
to the Agent from the Purchasers, the Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Master Servicer Default or Early Amortization Event or Potential Early
Amortization Event as it shall deem advisable in the best interests of the
Purchasers.
SECTION 10.06. Non-Reliance on Agent and Other Purchasers. Each
Purchaser expressly acknowledges that neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of the Company, shall be deemed to
constitute any representation or warranty by the Agent to any Purchaser. Each
Purchaser represents to the Agent that it has, independently and without
reliance upon the Agent or any other Purchaser, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Company and made its own decision to enter
into this Supplement. Each Purchaser also represents that it will, independently
and without reliance upon the Agent or any
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other Purchaser, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Supplement and the other
Transaction Documents, and to make such investigation as it deems necessary to
inform itself as to the business, operations, property, financial and other
condition and creditworthiness of the Company. Except for notices, reports and
other documents expressly required to be furnished to the Purchasers by the
Agent hereunder, the Agent shall not have any duty or responsibility to provide
any Purchaser with any credit or other information concerning the business,
operations, property, condition (financial or otherwise), prospects or
creditworthiness of the Borrower which may come into the possession of the Agent
or any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
SECTION 10.07. Indemnification. The Purchasers agree to indemnify
the Agent in its capacity as such (to the extent not reimbursed by the Company
and the Master Servicer and without limiting the obligation of the Company and
the Master Servicer to do so), ratably according to their respective Commitment
Percentages in effect on the date on which indemnification is sought (or, if
indemnification is sought after the Commitment Termination Date, ratably in
accordance with their Commitment Percentages immediately prior to such date),
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time be imposed or, incurred by or asserted
against the Agent in any way relating to or arising out of, the Commitments,
this Supplement any of the other Transaction Documents or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Agent under
or in connection with any of the foregoing; provided that no Purchaser shall be
liable for the payment of any portion of such liabilities, obligations, losses,
damages, penalties,
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actions, judgments, suits, costs, expenses or disbursements resulting solely
from the Agent's gross negligence or wilful misconduct. The agreements in this
Section shall survive the payment of all amounts payable hereunder.
SECTION 10.08. Agent in Its Individual Capacity. The Agent and its
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Company, the Master Servicer or any of their
Affiliates as though the Agent were not the Agent hereunder. With respect to any
VFC Certificate held by the Agent, the Agent shall have the same rights and
powers under this Supplement and the other Transaction Documents as any
Purchaser and may exercise the same as though it were not the Agent, and the
terms "Purchaser" and "Purchasers" shall include the Agent in its individual
capacity.
SECTION 10.09. Successor Agent. The Agent may resign as Agent upon
10 days' notice to the Purchasers. If the Agent shall resign as Agent under this
Supplement, then the Majority Purchasers shall appoint from among the Purchasers
a successor agent for the Purchasers, which successor agent shall be approved by
the Company and the Master Servicer (which approval shall not be unreasonably
withheld), whereupon such successor agent shall succeed to the rights, powers
and duties of the Agent, and the term "Agent" shall mean such successor agent
effective upon such appointment and approval, and the former Agent's rights,
powers and duties as Agent shall be terminated, without any other or further act
or deed on the part of such former Agent or any of the parties to this
Supplement. After any retiring Agent's resignation as Agent, the provisions of
this Article X shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Supplement.
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ARTICLE XI
Miscellaneous
SECTION 11.01. Ratification of Agreement. As supplemented by this
Supplement, the Agreement is in all respects ratified and confirmed and the
Agreement as so supplemented by this Supplement shall be read, taken and
construed as one and the same instrument.
SECTION 11.02. Governing Law. THIS SUPPLEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO ANY CONFLICT OF LAW PRINCIPLES, EXCEPT TO THE EXTENT ISSUES OF
PERFECTION ARE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION.
SECTION 11.03. Further Assurances. Each of the Company, the Master
Servicer and the Trustee agrees, from time to time, to do and perform any and
all acts and to execute any and all further instruments required or reasonably
requested by the Agent or Majority Purchasers more fully to effect the purposes
of this Supplement and the sale of the VFC Certificates hereunder, including,
without limitation, in the case of the Company and the Master Servicer, the
execution of any financing or registration statements or similar documents or
notices or continuation statements relating to the Receivables and the other
Trust Assets for filing or registration under the provisions of the UCC or
similar legislation of any applicable jurisdiction, provided that, in the case
of the Trustee, in furtherance and without limiting the generality of subsection
8.01(d) of the Agreement, the Trustee shall have received reasonable assurance
in writing of adequate reimbursement and indemnity in connection with taking
such action before the Trustee shall be required to take any such action.
SECTION 11.04. Payments. Each payment to be made hereunder shall be
made on the required payment date in lawful money of the United States and in
immediately
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available funds, if to the Purchasers, at the office of the Agent set forth
below its signature hereto. On each Distribution Date, the Agent shall remit in
like funds to each Purchaser its applicable pro rata share (based on each such
Purchaser's Series 1997-2 Invested Amount) of each such payment received by the
Agent for the account of the Purchasers.
SECTION 11.05. Costs and Expenses. The Company agrees to pay all
reasonable fees, out-of-pocket costs and expenses of the Agent (including,
without limitation, reasonable fees and disbursements of one counsel to the
Agent) in connection with (i) the preparation, execution and delivery of this
Supplement, the Agreement and the other Transaction Documents and amendments or
waivers of any such documents and (ii) the enforcement by the Agent of the
obligations and liabilities of the Company and the Master Servicer under the
Agreement, this Supplement or any related document; provided, however, that any
payments made by the Company pursuant to this Section shall be Company
Subordinated Obligations.
SECTION 11.06. No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Trustee, the Agent or
any Purchaser, any right, remedy, power or privilege hereunder, shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not
exhaustive of any rights, remedies, powers and privileges provided by law.
SECTION 11.07. Amendments. (a) Subject to subsection (c) of this
Section 11.07, this Supplement may be amended in writing from time to time by
the Master Servicer, the Company and the Trustee, with the consent of the Agent
but without the consent of any holder of any outstanding VFC Certificate, to
cure any ambiguity, to correct or supplement
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any provisions herein or therein which may be inconsistent with any other
provisions herein or therein or to add any other provisions to or changing in
any manner or eliminating any of the provisions with respect to matters or
questions raised under this Supplement which shall not be inconsistent with the
provisions of any Pooling and Servicing Agreement; provided, however, that such
action shall not, as evidenced by an Officer's Certificate delivered to the
Trustee upon which the Trustee may conclusively rely, have a Material Adverse
Effect or a Company Material Adverse Effect (but, to the extent that the
determination of whether such action would have a Material Adverse Effect or a
Company Material Adverse Effect requires a conclusion as to a question of law,
an Opinion of Counsel shall be delivered to the Trustee in addition to such
Officer's Certificate); provided, further, that any amendment that is entered
into to provide additional Enhancement for any Outstanding Series shall, be
deemed to have no Material Adverse Effect or Company Material Adverse Effect.
The Trustee may, but shall not be obligated to, enter into any such amendment
pursuant to this paragraph or paragraph (b) below that affects the Trustee's
rights, duties or immunities under any Pooling and Servicing Agreement or
otherwise.
(b) Subject to subsection (c) of this Section 11.07, this Supplement
may also be amended (other than in the circumstances referred to in subsection
(a)) in writing from time to time by the Master Servicer, the Company and the
Trustee with the consent of the Majority Purchasers for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of this Supplement or of modifying in any manner the rights of the VFC
Certificateholders; provided, however, that no such amendment shall, unless
signed or consented to in writing by all Purchasers, (i) extend the time for
payment, or reduce the amount, of any amount on money payable to or for the
account of any Purchaser under any provision of this Supplement, (ii) subject
any Purchaser to any additional obligation (including, without limitation, any
change in the determination of any amount payable by any Purchaser) or
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(iii) change the Aggregate Commitment Amount or the number of Purchasers which
shall be required for any action under this subsection or any other provision of
this Supplement.
(c) Any amendment hereof can be affected without the Agent being a
party thereto; provided, however, that no such amendment, modification or waiver
of this Supplement that affects rights or duties of the Agent shall be effective
unless the Agent shall have given its prior written consent thereto.
(d) No such amendment shall be effective until the Rating Agency
Condition is satisfied.
SECTION 11.08. Severability. If any provision hereof is void or
unenforceable in any jurisdiction, such voidness or unenforceability shall not
affect the validity or enforceability of (i) such provision in any other
jurisdiction or (ii) any other provision hereof in such or any other
jurisdiction.
SECTION 11.09. Notices. All notices, requests and demands to or upon
any party hereto to be effective shall be given (i) in the case of the Company,
the Master Servicer and the Trustee, in the manner set forth in Section 10.05 of
the Agreement and (ii) in the case of the Agent, each Purchaser and the Rating
Agencies, in writing (including a confirmed transmission 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, (A) in
the case of the Agent and each Purchaser, at their respective addresses set
forth below their names on Schedule 1 hereto and (B) in the case of the Rating
Agencies, at the addresses notified by such Rating Agencies;
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or to such other address as may be hereafter notified by the
respective parties hereto.
SECTION 11.10. Successors and Assigns. (a) This Supplement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
(b) Any Purchaser may assign to one or more assignees (any such
assignee shall be referred to herein as an "Acquiring Purchaser") all or a
portion of its interests, rights and obligations under this Supplement and the
Transaction Documents; provided, however, that (i) except in the case of an
assignment to a Purchaser or an Affiliate, the amount of the Commitment of the
assigning Purchaser subject to each such assignment (determined as of the date
the Commitment Transfer Supplement with respect to such assignment is delivered
to the Agent) shall not be less than $5,000,000 (or, if less, the entire
remaining amount of such Purchaser's Commitment), (ii) the parties to each such
assignment shall execute and deliver to the Agent the Commitment Transfer
Supplement, substantially in the form of Exhibit B, together with a processing
and recordation fee of $3,500 and (iii) the Acquiring Purchaser, if it shall not
be a Purchaser, shall deliver to the Agent an Administrative Questionnaire,
substantially in the form of Exhibit C. Upon acceptance and recording pursuant
to paragraph (e) of this Section 11.10, from and after the effective date
specified in each Commitment Transfer Supplement, which effective date shall be
at least five Business Days after the execution thereof, (A) the Acquiring
Purchaser thereunder shall be a party hereto and, to the extent of the interest
assigned by such Commitment Transfer Supplement, have the rights and obligations
of a Purchaser under this Supplement and (B) the assigning Purchaser thereunder
shall, to the extent of the interest assigned by such Commitment Transfer
Supplement, be released from its obligations under this Supplement and the other
Transaction Documents (and, in the case of an Commitment Transfer Supplement
covering all or the remaining portion of an assigning Purchaser's rights and
obligations
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under this Supplement and the other Transaction Documents, such Purchaser shall
cease to be a party hereto but shall continue to be entitled to the benefits of
Sections 7.01, 7.02, 7.03, 7.04 and 11.05, as well as to any fees accrued for
its account and not yet paid).
(c) By executing and delivering a Commitment Transfer Supplement,
the assigning Purchaser thereunder and the Acquiring Purchaser thereunder shall
be deemed to confirm to and agree with each other and the other parties hereto
as follows: (i) such assigning Purchaser warrants that it is the legal and
beneficial owner of the interest being assigned thereby free and clear of any
adverse claim and that its Commitment, and the outstanding balances of its VFC
Certificates, in each case without giving effect to assignments thereof which
have not become effective, are as set forth in such Commitment Transfer
Supplement; (ii) except as set forth in (i) above, such assigning Purchaser
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
this Supplement, or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Supplement, any other Transaction
Document or any other instrument or document furnished pursuant hereto or
thereto, or the financial condition of any Seller, any Servicer, the Company or
the Master Servicer, or the performance or observance by any Seller, any
Servicer, the Company or the Master Servicer of any of its obligations under
this Supplement, any other Transaction Document or any other instrument or
document furnished pursuant hereto or thereto; (iii) such Acquiring Purchaser
represents and warrants that it is legally authorized to enter into such
Commitment Transfer Supplement; (iv) such Acquiring Purchaser confirms that it
has received a copy of this Supplement and such other documents and information
as it has deemed appropriate to make its own credit analysis and decision to
enter into such Commitment Transfer Supplement; (v) such Acquiring Purchaser
will independently and without reliance upon the Agent, the Trustee, the
assigning Purchaser or any other
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Purchaser and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Supplement or any other Transaction Document; (vi)
such Acquiring Purchaser appoints and authorizes the Agent and the Trustee to
take such action as agent on its behalf and to exercise such powers under this
Supplement as are delegated to the Agent and the Trustee, respectively, by the
terms hereof, together with such powers as are reasonably incidental thereto;
and (vii) such Acquiring Purchaser agrees that it will perform in accordance
with their terms all the obligations which by the terms of this Supplement are
required to be performed by it as a Purchaser.
(d) Notwithstanding and in addition to the provisions of Section
5.03 of the Agreement, the Agent shall maintain at one of its offices in The
City of New York a copy of each Commitment Transfer Supplement delivered to it
and a register for the recordation of the names and addresses of the Purchasers,
and the Commitments of, and the principal amount of the VFC Certificates issued
to, each Purchaser pursuant to the terms hereof from time to time (the
"Register"). Notwithstanding the provisions of Section 5.05 of the Agreement,
the entries in the Register as provided in this subsection 11.10(d) shall be
conclusive and the Company, the Master Servicer, the Purchasers, the Paying
Agent, the Transfer Agent and Registrar, the Agent and the Trustee shall treat
each person whose name is recorded in the Register pursuant to the terms hereof
as a Purchaser hereunder for all purposes of this Supplement, notwithstanding
notice to the contrary. However, in accordance with Section 5.05 of the
Agreement, in determining whether the holders of the requisite Fractional
Undivided Interests have given any request, demand, authorization, direction,
notice, consent or waiver hereunder, VFC Certificates owned by the Company, the
Master Servicer or any Servicer or any Affiliate thereof, shall be disregarded
and deemed not to be outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such request, demand,
authorization,
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direction, notice, consent or waiver, only VFC Certificates which a Responsible
Officer of the Trustee actually knows to be so owned shall be so disregarded.
VFC Certificates so owned by the Company, the Master Servicer or any Servicer or
any Affiliate thereof which have been pledged in good faith shall not be
disregarded and may be regarded as outstanding if the pledgee establishes to the
satisfaction of the trustee the pledgee's right so to act with respect to such
VFC Certificates and that the pledgee is not the Company, the Master Servicer or
any Servicer or any Affiliate thereof. The Register shall be available for
inspection by the Company, the Master Servicer, the Purchasers and the Trustee,
at any reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of a duly completed Commitment Transfer
Supplement executed by an assigning Purchaser and an Acquiring Purchaser, an
Administrative Questionnaire completed in respect of the Acquiring Purchaser
(unless the Acquiring Purchaser shall already be a Purchaser hereunder) and the
processing and recordation fee referred to in paragraph (b) above, the Agent
shall (i) accept such Commitment Transfer Supplement, (ii) record the
information contained therein in the Register and (iii) give prompt written
notice thereof to the Purchasers, the Company, the Master Servicer and the
Trustee. No assignment shall be effective unless and until it has been recorded
in the Register as provided in this paragraph (e).
(f) Any Purchaser may sell participations to one or more banks or
other entities (the "Participants") in all or a portion of its rights and
obligations under this Supplement and the other Transaction Documents (including
all or a portion of its Commitment and VFC Certificates); provided, however,
that (i) such Purchaser's obligations under this Agreement shall remain
unchanged, (ii) such Purchaser shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) the Participants
shall be entitled to the benefit of the cost protection provisions contained in
Sections 7.01,
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7.02, 7.03 and 7.04, and shall be required to provide the tax forms and
certifications described in Section 7.03(b), to the same extent as if they were
Purchasers, provided that no such Participant shall be entitled to receive any
greater amount pursuant to such Sections than a Purchaser would have been
entitled to receive in respect of the amount of participation sold by such
Purchaser to such Participant had no sale occurred, (iv) the Company, the Master
Servicer, the other Purchasers, the Agent and the Trustee, shall continue to
deal solely and directly with such Purchaser in connection with such Purchaser's
rights and obligations under this Supplement, and such Purchaser shall retain
the sole right to enforce its rights under VFC Certificates and to approve any
amendment, modification or waiver of any provision of this Supplement (other
than amendments, modifications or waivers decreasing any fees payable hereunder
or the amount of principal of or the rate at which interest is payable on the
VFC Certificates, extending any scheduled principal payment date or date fixed
for the payment of interest on the VFC Certificates or increasing or extending
the Commitments) and (v) the sum of the aggregate amount of any Commitment or
portion thereof subject to each such participation plus the portion of the
Series 1997-2 Invested Amount represented by any VFC Certificates subject to
such participation shall not be less than $1,000,000.
(g) Any Purchaser may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
11.10, disclose to the Acquiring Purchaser or Participant or proposed Acquiring
Purchaser or Participant any information relating to the Sellers, the Servicers,
the Master Servicer, the Trust or the Company furnished to such Purchaser by or
on behalf of such entities, provided that, prior to any such disclosure of
information, each such Acquiring Purchaser or Participant or proposed Acquiring
Purchaser or Participant shall execute a confidentiality agreement in the form
of Exhibit G.
(h) Neither the Company nor the Master Servicer shall assign or
delegate any of its rights or duties
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hereunder without the prior written consent of the Agent, the Trustee and each
Purchaser, and any attempted assignment without such consent shall be null and
void.
(i) Notwithstanding any other provisions herein, no transfer or
assignment of any interests or obligations of any Purchaser hereunder or any
grant of participations therein shall be permitted if such transfer, assignment
or grant would result in a prohibited transaction under Section 4975 of the
Internal Revenue Code or Section 406 of ERISA or cause the Trust Assets to be
regarded as "plan assets" pursuant to 29 C.F.R. ss. 2510.3-101, or require the
Company or any Seller to file a registration statement with the Securities and
Exchange Commission or to qualify under the "blue sky" laws of any state.
SECTION 11.11. Counterparts. This Supplement may be executed in any
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original,
and all of which taken together shall constitute one and the same agreement.
SECTION 11.12. Adjustments; Setoff. (a) If any Purchaser (a
"Benefitted Purchaser") shall at any time receive in respect of its Series
1997-2 Purchaser Invested Amount any distribution of principal, interest,
Commitment Fees or other fees, or any interest thereon, or receive any
collateral in respect thereof (whether voluntarily or involuntarily, by setoff,
or otherwise) in a greater proportion than any such distribution received by any
other Purchaser, if any, in respect of such other Purchaser's Series 1997-2
Purchaser Invested Amount, or interest thereon, such Benefitted Purchaser shall
purchase for cash from the other Purchasers such portion of each such other
Purchaser's interest in the VFC Certificates, or shall provide such other
Purchasers with the benefits of any such collateral, or the proceeds thereof, as
shall be necessary to cause such Benefitted Purchaser to share the excess
payment or benefits of such collateral or proceeds ratably
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with each of the Purchasers; provided, however, that if all or any portion of
such excess payment or benefits is thereafter recovered from such Benefitted
Purchaser, such purchase shall be rescinded, and the purchase price and benefits
returned, to the extent of such recovery, but without interest. The Company
agrees that each Purchaser so purchasing a portion of the VFC
Certificateholders' Interest may exercise all rights of payment (including,
without limitation, rights of setoff) with respect to such portion as fully as
if such Purchaser were the direct holder of such portion.
(b) In addition to any rights and remedies of the Purchasers
provided by law, each Purchaser shall have the right, without prior notice to
the Company, any such notice being expressly waived by the Company to the extent
permitted by applicable law, upon any amount becoming due and payable by the
Company hereunder or under the VFC Certificates to setoff and appropriate and
apply against any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such Purchaser to
or for the credit or the account of the Company. Each Purchaser agrees promptly
to notify the Company and the Agent after any such setoff and application made
by such Purchaser; provided that the failure to give such notice shall not
affect the validity of such setoff and application.
SECTION 11.13. Limitation of Payments by Company. The Company's
obligations under Article VII shall be limited to the funds available to the
Company which have been properly distributed to the Company pursuant to the
Agreement and any Supplement and neither the Agent nor any Purchaser shall have
any actionable claim against the Company for failure to satisfy such obligation
because it does not have funds available therefor from amounts properly
distributed.
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Series 1997-2 Supplement
SECTION 11.14. No Bankruptcy Petition. Each Purchaser hereby
covenants and agrees that, prior to the date which is one year and one day after
the later of (i) the last day of the Series 1997-2 Amortization Period and (ii)
the date on which all Investor Certificates of each other Outstanding Series are
repaid in full, 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 similar proceedings under any
Federal or state bankruptcy or similar law.
SECTION 11.15. Limitation on Addition and Termination of Sellers.
(a) Notwithstanding anything to the contrary contained in the Receivables Sale
Agreement or the Agreement, the Company shall not consent to the addition of a
Seller thereunder unless each of the following conditions shall have been
satisfied.
(i) Each of the conditions set forth in Section 3.05 of the
Receivables Sale Agreement shall have been satisfied and the Trustee shall
have received evidence in the form of an appropriate Officer's Certificate
as to that fact.
(ii) The Company, the Trustee and the Agent shall have received
evidence that the Rating Agency Condition shall have been satisfied with
respect to the addition of such Seller; provided that satisfaction of the
Rating Agency Condition (and such receipt of evidence thereof) shall not
be required with respect to the addition of up to three additional Sellers
during any calendar year, each of which meets the following criteria: (x)
such proposed additional Seller is, in the judgment of the Company as
certified by the Company to the Trustee in an Officer's Certificate, in
the same line of business as the existing Sellers as of the related Seller
Addition Date (as defined in the Receivables Sale Agreement and (y) as of
the Seller Addition Date, immediately prior to giving effect to
<PAGE>
93
Series 1997-2 Supplement
such addition, the ratio (as determined by the Company and expressed as a
percentage) of (I)the aggregate Principal Amount of what would constitute
all Eligible Receivables of the proposed additional Seller if it were a
Seller at the end of the Business Date immediately preceding the Seller
Addition Date minus the amount which would constitute the
Overconcentration Amount applicable to such Receivables on the Seller
Addition Date if the proposed additional Seller were a Seller to (II) the
Aggregate Receivables Amount on the Seller Addition Date (before giving
effect to such addition), is less than five percent.
(iii) The Company, the Trustee and the Agent shall have received a
certificate prepared by a Responsible Officer of each Servicer certifying
that after giving effect to the addition of such Seller, the Aggregate
Target Receivables Amount shall equal or exceed the Aggregate Allocated
Receivables Amount on the related Seller Addition Date.
(iv) The Trustee shall have notified the Company, the Agent and each
Rating Agency that a Standby Liquidation System is in place for such
proposed additional Seller.
(v) Each Purchaser shall have given its prior written consent to the
addition of such Seller, which shall not be unreasonably withheld;
provided, that Purchaser consent shall not be required for the addition of
Sunbury Textile Mills as a Seller.
(b) Notwithstanding anything to the contrary contained in the
Receivables Sale Agreement, the Company shall not consent to any request made
pursuant to Section 9.14(b) thereof, nor shall any Seller which is the subject
of such request be terminated under the Receivables Sale Agreement, in each case
unless (i) no Early Amortization Event, Potential Early Amortization Event or
Potential Purchase Termination Event (as defined in the
<PAGE>
94
Series 1997-2 Supplement
Receivables Sale Agreement) (other than with respect to the Seller to be so
terminated) has occurred and is continuing (both before and after giving effect
to such termination) and (ii) the Trustee shall have received prior written
notice of such termination (which notice shall be accompanied by a pro forma
Daily Report confirming that the Aggregate Target Receivables Amount equals or
exceeds the Aggregate Allocated Receivables Amount, each calculated after giving
effect to such termination and excluding all Receivables originated by the
Seller to be terminated).
(c) Upon the termination of a Seller pursuant to Section 9.14(b) of
the Receivables Sale Agreement and the foregoing paragraph (b), the calculation
(including, without limitation, for purposes of the pro forma calculations
pursuant to paragraph (b) above) of the Aggregate Target Receivables Amount, the
Aggregate Allocated Receivables Amount, the Series 1997-2 Required Subordinated
Amount and all other amounts from which each such amount is directly or
indirectly derived shall exclude in each case the Receivables originated by such
terminated Seller.
ARTICLE XII
Final Distributions
SECTION 12.01. Certain Distributions. (a) Not later than 2:00 p.m.,
New York City time, on the Distribution Date following the date on which the
proceeds from the disposition of the Receivables pursuant to subsection 7.02(b)
of the Agreement are deposited into the Series 1997-2 Non-Principal Collection
Sub-subaccount and the Series 1997-2 Principal Collection Sub-subaccount, the
Trustee shall distribute such amounts pursuant to Article III of this
Supplement.
(b) Notwithstanding anything to the contrary in this Supplement or
the Agreement, any distribution made pursuant to this Section shall be deemed to
be a final
<PAGE>
95
Series 1997-2 Supplement
distribution pursuant to Section 9.03 of the Agreement with respect to the VFC
Certificates.
<PAGE>
96
Series 1997-2 Supplement
IN WITNESS WHEREOF, the Company, the Master Servicer, the Trustee,
the Agent and the Initial Purchasers have caused this Series 1997-2 Supplement
to be duly executed by their respective officers as of the day and year first
above written.
LFI RECEIVABLES CORPORATION,
by ______________________________________
Name:
Title:
LFI SERVICING CORPORATION, as
Master Servicer,
by ______________________________________
Name:
Title:
THE CHASE MANHATTAN BANK, not
in its individual capacity but
solely as Trustee,
by ______________________________________
Name:
Title:
<PAGE>
97
Series 1997-2 Supplement
THE CHASE MANHATTAN BANK, as
Agent,
by ______________________________________
Name:
Title:
THE CHASE MANHATTAN BANK, as
Initial Purchaser,
by ______________________________________
Name:
Title:
<PAGE>
EXHIBIT A TO SERIES
1997-2 SUPPLEMENT
LFI RECEIVABLES MASTER TRUST
FORM OF VFC CERTIFICATE, SERIES 1997-2
REGISTERED UP TO $_____________.00 SERIES
NO. VFC-[ ] 1997-2 PURCHASER INVESTED AMOUNT*
(OF UP TO $_____________.00 SERIES
1997-2 INVESTED AMOUNT ISSUED)
*THE SERIES 1997-2 PURCHASER INVESTED AMOUNT OF THIS VFC CERTIFICATE
IS SUBJECT TO CHANGE AS DESCRIBED HEREIN.
THIS VFC CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "SECURITIES ACT"). NEITHER THIS VFC CERTIFICATE NOR ANY PORTION
HEREOF MAY BE OFFERED OR SOLD EXCEPT IN COMPLIANCE WITH THE REGISTRATION
PROVISIONS OF THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH
REGISTRATION PROVISIONS.
THIS VFC CERTIFICATE IS NOT PERMITTED TO BE TRANSFERRED, ASSIGNED,
EXCHANGED OR OTHERWISE PLEDGED OR CONVEYED EXCEPT IN COMPLIANCE WITH THE TERMS
OF THE POOLING AGREEMENT AND SUPPLEMENT REFERRED TO HEREIN.
This VFC Certificate evidences a fractional undivided interest in
the assets of the
LFI RECEIVABLES MASTER TRUST
the corpus of which consists of receivables representing amounts payable for
goods or services, which receivables have been purchased by LFI Receivables
Corporation, a Delaware corporation, which in turn transferred and assigned such
receivables to the LFI Receivables Master Trust.
(Not an interest in or obligation of
LFI Receivables Corporation, the Sellers listed on
Schedule 1 to the Receivables Sale Agreement
or any Affiliate thereof)
<PAGE>
2
This certifies that
[NAME OF CERTIFICATEHOLDER]
(the "VFC Certificateholder") is the registered owner of a fractional undivided
interest in the assets of LFI Receivables Master Trust (the "Trust") created
pursuant to the Pooling Agreement, dated as of August 5, 1996 (as amended and
restated on February 4, 1997, and as the same may from time to time be amended,
restated, supplemented or otherwise modified thereafter, the "Pooling
Agreement"), by and among LFI Receivables Corporation, a Delaware corporation
(the "Company"), LFI Servicing Corporation, a Delaware corporation, as master
servicer (the "Master Servicer"), and The Chase Manhattan Bank, a New York
banking corporation, not in its individual capacity but solely as trustee (in
such capacity, the "Trustee") for the Trust, as supplemented by the Series
1997-2 Supplement, dated as of February 4, 1997 (as amended, supplemented or
otherwise modified from time to time, the "Supplement", collectively, with the
Pooling Agreement, the "Agreement"), by and among the Company, the Master
Servicer, the Trustee, the purchasers named therein and from time to time
parties thereto (the "Purchasers") and The Chase Manhattan Bank, a New York
corporation, as initial purchaser and agent for the Purchasers (in such
capacity, the "Agent"). The corpus of the Trust consists of receivables (the
"Receivables") representing amounts payable for goods or services and all other
Trust Assets referred to in the Agreement. Although a summary of certain
provisions of the Agreement is set forth below, this VFC Certificate does not
purport to summarize the Agreement, is qualified in its entirety by the terms
and provisions of the Agreement and reference is made to the Agreement for
information with respect to the interests, rights, benefits, obligations,
proceeds and duties evidenced hereby and the rights, duties and obligations of
the Trustee. A copy of the Agreement may be requested by a holder hereof by
writing to the Trustee at The Chase
<PAGE>
3
Manhattan Bank, 450 W. 33rd Street, 15th Floor, New York, New York 10011,
Attention of Advanced Structured Products Group. To the extent not defined
herein, the capitalized terms used herein have the meanings ascribed to them in
the Agreement.
This VFC Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the VFC
Certificateholder, by virtue of the acceptance hereof, assents and is bound.
The Master Servicer, the Servicers, the Company, each VFC
Certificateholder and the Trustee intend, for federal, state and local income
and franchise tax purposes only, that the VFC Certificates be evidence of
indebtedness of the Company secured by the Trust Assets and that the Trust not
be characterized as an association or publicly traded partnership taxable as a
corporation. The VFC Certificateholder, by the acceptance hereof, agrees to
treat the VFC Certificates for federal, state and local income and franchise tax
purposes as indebtedness of the Company.
This VFC Certificate is one in a Series of Investor Certificates
entitled "LFI Receivables Master Trust, VFC Certificates, Series 1997-2" (the
"VFC Certificates") representing a fractional undivided interest in the Trust
Assets, consisting of the right to receive the distributions specified in the
Supplement out of (i) the Series 1997-2 Invested Percentage (expressed as a
decimal) of Collections received with respect to the Receivables and all other
funds on deposit in the Collection Account and (ii) to the extent such interests
appear in the Supplement, all other funds on deposit in the Series 1997-2
Collection Subaccount and any subaccounts thereof (collectively, the "VFC
Certificateholders' Interest"). Concurrent with the issuance of the VFC
Certificates, the Trust shall also issue a Subordinated Company Interest to the
Company representing a fractional undivided interest in the Trust Assets,
consisting of the right to receive the distributions specified in the Supplement
out of (i) the Series 1997-2
<PAGE>
4
Invested Percentage (expressed as a decimal) of Collections received with
respect to the Receivables and all other funds on deposit in the Collection
Account and (ii) to the extent such interests appear in the Supplement, all
other funds on deposit in the Series 1997-2 Collection Subaccount and any
subaccounts thereof, in each case to the extent not required to be distributed
to or for the benefit of the VFC Certificateholders (the "Series 1997-2
Subordinated Interest"). The Trust Assets are allocated in part to the VFC
Certificateholders and the holders of the Series 1997-2 Subordinated Interest
with the remainder allocated to the Investor Certificateholders and the holders
of the Subordinated Company Interests of other Series, if any, and to the
Company. An Exchangeable Company Interest representing the Company's interest in
the Trust was issued to the Company pursuant to the Pooling Agreement on August
5, 1996. The Exchangeable Company Interest represents the interest in the Trust
Assets not represented by the Investor Certificates and the Subordinated Company
Interests of each Outstanding Series. The Exchangeable Company Interest may be
decreased by the Company pursuant to the Pooling Agreement in exchange for an
increase in the Invested Amount of a Class of Investor Certificates of an
Outstanding Series and an increase in the related Series Subordinated Company
Interest, or one or more newly issued Series of Investor Certificates and the
related newly issued Series Subordinated Company Interest, upon the conditions
set forth in the Agreement.
Distributions with respect to this VFC Certificate shall be paid by
the Agent in immediately available funds to the VFC Certificateholder at the
office of the Agent set forth in the Agreement. Final payment of this VFC
Certificate shall be made only upon presentation and surrender of this VFC
Certificate at the office or agency specified in the notice of final
distribution delivered by the Trustee to the VFC Certificateholders in
accordance with the Agreement.
<PAGE>
5
This VFC Certificate does not represent an obligation of, or an
interest in, the Company, the Master Servicer or any Affiliate of either of
them.
The transfer of this VFC Certificate shall be registered in the
Certificate Register upon surrender of this VFC Certificate for registration of
transfer at any office or agency maintained by the Transfer Agent and Registrar
accompanied by a written instrument of transfer, in a form satisfactory to the
Trustee and the Transfer Agent and Registrar, duly executed by the VFC
Certificateholder or the VFC Certificateholder's attorney, and duly authorized
in writing with such signature guaranteed, and thereupon one or more new VFC
Certificates of authorized denominations and of like aggregate Fractional
Undivided Interests will be issued to the designated transferee or transferees.
In addition, the Agent shall maintain at one of its offices in the City of New
York the Register for the recordation of the names and addresses of the
Purchasers, and the Commitment of, and the principal amount of VFC Certificates
issued to, each Purchaser.
The Company, the Trustee, the Master Servicer, the Transfer Agent
and Registrar, the Agent and any agent of any of them, may treat the person
whose name is recorded in the Register as a Purchaser for all purposes of the
Supplement, notwithstanding notice to the contrary (other than notice in
connection with an assignment effected or to be effected in accordance with
Section 11.10 of the Supplement).
It is expressly understood and agreed by the Company and the VFC
Certificateholder that (i) the Agreement is executed and delivered by the
Trustee, not individually or personally but solely as Trustee of the Trust, in
the exercise of the powers and authority conferred and vested in it, (ii) the
representations, undertakings and agreements made on the part of the Trust in
the Agreement are made and intended not as personal representations,
undertakings and agreements by the Trustee, but are made and intended for the
purpose of binding only the Trust, (iii) nothing herein
<PAGE>
6
contained shall be construed as creating any liability of the Trustee,
individually or personally, to perform any covenant either expressed or implied
made on the part of the Trust in the Agreement, all such liability, if any,
being expressly waived by the parties who are signatories to the Agreement and
by any Person claiming by, through or under such parties; provided, however, the
Trustee shall be liable in its individual capacity for its own wilful misconduct
or gross negligence and for any tax assessed against the Trustee based on or
measured by any fees, commission or compensation received by it for acting as
Trustee and (iv) under no circumstances shall the Trustee be personally liable
for the payment of any indebtedness or expenses of the Trust or be liable for
the breach or failure of any obligation, representation, warranty or covenant
made or undertaken by the Trust under the Agreement.
The holder of this VFC Certificate is authorized to record the date
and amount of each increase and decrease in the Series 1997-2 Purchaser Invested
Amount with respect to such holder on the schedules annexed hereto and made a
part hereof and any such recordation shall constitute prima facie evidence of
the accuracy of the information so recorded, absent manifest error, provided
that the failure of the holder of this VFC Certificate to make such recordation
(or any error in such recordation) shall not affect the obligations of the
Company, the holder of the Series 1997-2 Subordinated Certificate, the Master
Servicer or the Trustee under the Agreement.
This VFC Certificate shall be construed in accordance with and
governed by the laws of the State of New York without reference to any conflict
of law principles.
By acceptance of this VFC Certificate, the VFC Certificateholder
hereby agrees that, prior to the date which is one year and one day after the
later of (i) the last day of the Series 1997-2 Amortization Period and (ii) the
date on which all Investor Certificates of each other Outstanding Series are
repaid in full, it will not
<PAGE>
7
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.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, by manual signature, this VFC Certificate shall not
be entitled to any benefit under the Agreement, or be valid for any purpose.
IN WITNESS WHEREOF, the Company has caused this VFC Certificate to
be duly executed.
Dated: _____________, 1997
LFI RECEIVABLES CORPORATION,
as authorized pursuant to
Section 5.01 of the Pooling
Agreement,
by ____________________________________
Title
<PAGE>
8
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the VFC Certificates described in the
within-mentioned Agreement.
THE CHASE MANHATTAN BANK, not
in its individual capacity but
solely as Trustee,
by ____________________________________
Authorized Signatory
OR
by ____________________________________
Authenticating Agent
by ____________________________________
Authorized Signatory
<PAGE>
Schedule 1
to VFC Certificate
================================================================================
Increase Decrease
in Series in Series
1997-2 1997-2 Series 1997-2
Purchaser Purchaser Purchaser
Invested Invested Invested Notation
Date Amount Amount Amount Made By
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
================================================================================
<PAGE>
EXHIBIT C TO SERIES
1997-2 SUPPLEMENT
[Form of]
[ ]
ADMINISTRATIVE QUESTIONNAIRE
Please accurately complete the following information and return via Telecopy to
the attention of [ ] at [ ] as soon as possible, at Telecopy No. ( ) [ ].
________________________________________________________________________________
PURCHASER LEGAL NAME TO APPEAR IN DOCUMENTATION:
________________________________________________________________________________
GENERAL INFORMATION:
Institution Name: ______________________________________________________________
Street Address: ________________________________________________________________
City, State, Zip Code: _________________________________________________________
POST-CLOSING, ONGOING CREDIT CONTACTS/NOTIFICATION METHODS:
CREDIT CONTACTS: _______________________________________________________________
Primary Contact: _______________________________________________________________
Street Address: ________________________________________________________________
City, State, Zip Code: _________________________________________________________
Phone Number: __________________________________________________________________
Telecopy Number: _______________________________________________________________
<PAGE>
Backup Contact: ________________________________________________________________
Street Address: ________________________________________________________________
City, State, Zip Code: _________________________________________________________
Phone Number: __________________________________________________________________
Telecopy Number: _______________________________________________________________
TAX WITHHOLDING:
Nonresident Alien _________ Y* __________ N
* Form 4224 Enclosed
Tax ID Number _____________________________
POST-CLOSING, ONGOING ADMINISTRATIVE CONTACTS/NOTIFICATION
METHODS:
ADMINISTRATIVE CONTACTS - PAYMENTS, FEES, ETC.
Contact: _______________________________________________________________________
Street Address: ________________________________________________________________
City, State, Zip Code: _________________________________________________________
Phone Number: __________________________________________________________________
Telecopy Number: _______________________________________________________________
PAYMENT INSTRUCTIONS:
Name of Bank to which funds are to be transferred:
<PAGE>
________________________________________________________________________________
Routing Transit/ABA number of Bank to which funds are to be transferred:
________________________________________________________________________________
Name of Account, if applicable:
________________________________________________________________________________
Account Number: ________________________________________________________________
Additional information: ________________________________________________________
________________________________________________________________________________
It is very important that all the above information be accurately completed and
that this questionnaire be returned to the person specified in the introductory
paragraph of this questionnaire as soon as possible. If there is someone other
than yourself who should receive this questionnaire, please notify us of that
person's name and telecopy number and we will telecopy a copy of the
questionnaire. If you have any questions about this form, please call
[ ] at ( ) [ ].
<PAGE>
EXHIBIT F TO SERIES
1997-2 SUPPLEMENT
FORM OF ISSUANCE/INCREASE NOTICE
________, 199__
[Agent/Address of Agent]
Telecopier:
Attention:
Ladies and Gentlemen:
Reference is hereby made to the Series 1997-2 Supplement, dated as
of , 1997 (as amended or supplemented, the "Supplement"), among
LFI Receivables Corporation (the "Company"), LFI Servicing Corporation (the
"Master Servicer"), the purchasers named therein and from time to time party
thereto, [ ], the purchases named therein and from time to
time party thereto, as Agent and Initial Purchaser, and The Chase Manhattan
Bank, as Trustee. Capitalized terms used in this Notice and not otherwise
defined herein shall have the meanings assigned thereto in the Supplement.
This Notice constitutes the notice required in connection with [the
initial issuance] [any Increase] pursuant to subsection 2.05(a) of the
Supplement.
The [Master Servicer] [Company] hereby requests [a purchase in
respect of the initial issuance of Investor Certificates] [an Increase] be made
by the Purchasers on ______, ___ in the aggregate amount of $_______, such
[purchase] [Increase] to be allocated to a [Floating Tranche] [Eurodollar
Tranche with a Eurodollar Period of one month].
The [Master Servicer] [Company] hereby represents and warrants, as
of the date of such [purchase] [Increase]
<PAGE>
2
after giving effect thereto, that the conditions set forthin subsections 2.05(a)
and (b) of the Supplement with respect to such [purchase] [Increase] have been
satisfied.
IN WITNESS WHEREOF, the undersigned has caused this Notice to be
executed by its duly authorized officer as of the date first above written.
[LFI SERVICING CORPORATION, as
Master Servicer]
[LFI RECEIVABLES CORPORATION]
By:_________________________________
Name:
Title:
<PAGE>
EXHIBIT G TO SERIES
1997-2 SUPPLEMENT
Form of Confidentiality Agreement
(Telecopy to [ ] at - )
[Name of assignor Purchaser]
Ladies and Gentlemen:
You are prepared to furnish to the undersigned [describe information
to be provided]. The [described information] and any other materials, documents
and information which you, the Sellers, the Servicers, the Master Servicer, the
Company and the Trustee, on behalf of the Trust, or any of your or their
respective affiliates may furnish to us in connection with our evaluation of a
possible assignment or participation are collectively called the "Information".
Terms used herein that are not otherwise defined herein shall have the meaning
ascribed to such terms in the Amended and Restated Pooling Agreement, dated as
of January , 1997 among LFI Receivables Corporation, LFI Servicing Corporation
and The Chase Manhattan Bank, as Trustee.
We agree to keep confidential, and to not publish, disclose or
otherwise divulge, the Information (and to cause our officers, directors,
employees, agents and representatives to keep confidential, and to not publish,
disclose or otherwise divulge, the Information) and, at your, the Sellers', the
Servicers', the Master Servicer's, the Company's or the Trustee's request
(except as provided below), promptly to return to you, the Sellers, the
Servicers, the Master Servicer, the Company or the Trustee (as applicable), or
destroy, the Information and all copies thereof, extracts therefrom and analyses
or other materials
<PAGE>
2
based thereon, except that we shall be permitted to disclose Information (i) to
such of our officers, directors, employees, agents and representatives as need
to know such Information in connection with our evaluation of a possible
assignment or participation (who will be informed of the confidential nature of
the Information); (ii) to the extent required by applicable laws or regulations
or by any subpoena or similar legal process, or requested by any bank regulatory
authority (in any which event we will notify you, the Sellers, the Servicers,
the Master Servicer, the Company or the Trustee to the extent not prohibited by
applicable law); (iii) to the extent such Information (A) becomes publicly
available other than as a result of a breach of this agreement, (B) becomes
available to us on a non- confidential basis from a source other than you, the
Sellers, the Servicers, the Master Servicer, the Company or the Trustee or any
of your Affiliates or (C) was available to us on a non-confidential basis prior
to its disclosure to us by you; (iv) to the extent you, the Sellers, the
Servicers, the Master Servicer, the Company and the Trustee shall have consented
to such disclosure in writing; or (v) pursuant to the last paragraph of this
letter.
We further agree that we will use the Information (except to the
extent the conditions referred to in subclauses (A), (B) and (C) of clause (iii)
above have been met and as provided in the last paragraph of this letter) only
to evaluate a possible assignment or participation.
We further agree, in the event we participate in an assignment or
participation, that we will not disclose any of the Information to any assignee
or participant or proposed assignee or participant unless and until such
assignee or participant or proposed assignee or participant first executes and
delivers to you a letter substantially in the form hereof.
Our obligations under this letter are for the benefit of you, the
Sellers, the Servicers, the Master Servicer, the Company and the Trustee and
your and their
<PAGE>
3
Affiliates and you and each of them may pursue remedies against us for the
breach hereof, either in equity or at law.
Notwithstanding anything to the contrary contained above if we
participate in an assignment or participation, we will be entitled to retain all
Information and to use it in monitoring our investment and in exercising our
rights with respect thereto. This agreement shall be governed by the laws of the
State of New York.
Name of Recipient:
by:
-----------------------------
Authorized Officer
------------------------------
[Name of Assignee/Participant/
Proposed Assignee/Proposed
Participant]
<PAGE>
Schedule 1 to the
Series 1997-2 Supplement
Commitments
Purchaser Commitment
- --------- ----------
The Chase Manhattan Bank $50,000,000
Address: 270 Park Avenue
New York, New York 10017
<PAGE>
Schedule 2 to the
Series 1997-2 Supplement
Trust Accounts
Account
-------
Series 1997-2 Collection Subaccount
Series 1997-2 Principal Collection Sub-
subaccount
Series 1997-2 Non-Principal Collection
Sub-subaccount
Series 1997-2 Accrued Interest Sub-
subaccount
<PAGE>
Exhibit 10.10
================================================================================
AMENDED AND RESTATED
SERVICING AGREEMENT
Among
LFI RECEIVABLES CORPORATION,
LFI SERVICING CORPORATION,
as Master Servicer,
the Servicers Party Hereto
and
THE CHASE MANHATTAN BANK,
as Trustee
Dated as of February 4, 1997
================================================================================
<PAGE>
TOC for Amended and Restated Servicing Agreement
TABLE OF CONTENTS
ARTICLE I
Definitions
SECTION 1.01. Definitions...................................... 2
SECTION 1.02. Other Definitional Provisions.................... 2
ARTICLE II
Administration and Servicing of Receivables
SECTION 2.01. Appointment of Master Servicer,
Servicers...................................... 4
SECTION 2.02. Servicing Procedures............................. 5
SECTION 2.03. Collections...................................... 8
SECTION 2.04. Reconciliation of Deposits....................... 10
SECTION 2.05. Servicing Compensation........................... 10
ARTICLE III
Representations and Warranties of the
Master Servicer and the Servicers
SECTION 3.01. Organization; Powers............................. 12
SECTION 3.02. Authorization; No Conflict....................... 12
SECTION 3.03. Enforceability................................... 13
SECTION 3.04. Governmental Approvals........................... 13
SECTION 3.05. Litigation; Compliance with Laws................. 14
SECTION 3.06. Agreements....................................... 14
SECTION 3.07. No Servicer Default.............................. 15
SECTION 3.08. Servicing Ability................................ 15
SECTION 3.09. Location of Records.............................. 15
SECTION 3.10. Insurance........................................ 15
<PAGE>
TOC for Amended and Restated Servicing Agreement 2
ARTICLE IV
Covenants of the Master Servicer
and the Servicers
SECTION 4.01. Delivery of Daily Reports........................ 15
SECTION 4.02. Delivery of Monthly Settlement
Statement...................................... 16
SECTION 4.03. Delivery of Annual Master Servicer's and
Servicers' Certificates........................ 17
SECTION 4.04. Delivery of Independent Public
Accountants' Servicing Reports................. 18
SECTION 4.05. Extension, Amendment and Adjustment of
Receivables; Amendment of Policies............. 18
SECTION 4.06. Protection of Holders' Rights.................... 19
SECTION 4.07. Security Interest................................ 20
SECTION 4.08. Location of Records.............................. 20
SECTION 4.09 Visitation Rights................................ 20
SECTION 4.10. Lockbox Agreement; Lockbox Accounts.............. 21
SECTION 4.11. Delivery of Financial Statements................. 22
SECTION 4.12. Notices.......................................... 24
SECTION 4.13. Insurance........................................ 24
ARTICLE V
Other Matters Relating to the Master Servicer
and the Servicers
SECTION 5.01. Merger, Consolidation, etc....................... 25
SECTION 5.02. Indemnification of the Trust and the
Trustee........................................ 26
SECTION 5.03. Master Servicer and Servicers Not to
Resign......................................... 27
SECTION 5.04. Access to Certain Documentation and
Information Regarding the
Receivables.................................... 27
<PAGE>
TOC for Amended and Restated Servicing Agreement 3
ARTICLE VI
Servicer Defaults; Servicer Termination
SECTION 6.01. Servicer Defaults................................ 28
SECTION 6.02. Trustee to Act; Appointment of
Successor...................................... 35
SECTION 6.03. Waiver of Past Defaults.......................... 38
SECTION 6.04. Other Servicer Terminations...................... 38
ARTICLE VII
Miscellaneous Provisions
SECTION 7.01. Amendment........................................ 39
SECTION 7.02. Termination...................................... 39
SECTION 7.03. Governing Law.................................... 40
SECTION 7.04. Addition of Servicers............................ 40
SECTION 7.05. Notices.......................................... 40
SECTION 7.06. Counterparts..................................... 40
SECTION 7.07. Third-Party Beneficiaries........................ 41
SECTION 7.08. Merger and Integration........................... 41
SECTION 7.09. Headings......................................... 41
SECTION 7.10. No Set-Off....................................... 41
SECTION 7.11. No Bankruptcy Petition........................... 41
Exhibit A Form of Annual Servicer's Certificate
Exhibit B Form of Agreed Upon Procedures
Exhibit C Insurance Requirements
<PAGE>
AMENDED AND RESTATED SERVICING AGREEMENT, dated as
of February 4, 1997 (this "Agreement") among LFI
RECEIVABLES CORPORATION, a Delaware corporation (the
"Company"), LFI SERVICING CORPORATION, a Delaware
corporation, as the master servicer (the "Master
Servicer"), the servicers party hereto (the "Servicers")
and THE CHASE MANHATTAN BANK, not in its individual
capacity, but solely as trustee (in such capacity, the
"Trustee").
W I T N E S S E T H:
WHEREAS, the Company, the Sellers and the Servicers have entered
into an Amended and Restated Receivables Sale Agreement, dated as of the date
hereof (the "Receivables Sale Agreement");
WHEREAS, pursuant to the Receivables Sale Agreement, the Sellers
sell to the Company, and the Company purchases from the Sellers, all the
Sellers' right, title and interest in, to and under the Receivables and other
Receivable Assets (as defined in the Receivables Sale Agreement);
WHEREAS, the parties hereto entered into that certain Servicing
Agreement, dated as of August 5, 1996 (the "Original Servicing Agreement") in
order to provide for the servicing of the Receivables;
WHEREAS, the parties wish to amend and restate the Original
Servicing Agreement so as to amend various provisions of the Original Servicing
Agreement; and
<PAGE>
Amended and Restated Servicing Agreement 2
WHEREAS, the Original Servicing Agreement shall be replaced in whole
by this Amended and Restated Servicing Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. Unless otherwise defined herein,
capitalized terms that are used herein shall have the meanings assigned to such
terms in the Pooling Agreement and each Supplement thereto.
SECTION 1.02. Other Definitional Provisions. (a) All terms defined
in this Agreement (directly or by incorporation by reference pursuant to Section
1.01) shall have the defined meanings when used in any certificates or other
document made or delivered pursuant hereto unless otherwise defined therein.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined herein
(directly or by incorporation by reference pursuant to Section 1.01) and
accounting terms partly defined herein (directly or by incorporation by
reference pursuant to Section 1.01), to the extent not defined, shall have the
respective meanings given to them under GAAP. To the extent that the definitions
of accounting terms herein are inconsistent with the meanings of such terms
under GAAP, the definitions contained herein shall control.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any
<PAGE>
Amended and Restated Servicing Agreement 3
particular provision of this Agreement, and Section, subsection, Schedule and
Exhibit references contained in this Agreement are references to Sections,
subsections, Schedules and Exhibits in or to this Agreement unless otherwise
specified.
(d) The definitions contained herein are applicable to the singular
as well as the plural forms of such terms and to the masculine, the feminine and
the neuter genders of such terms.
(e) Where reference is made in this Agreement to the principal
amount of Receivables, such reference shall, unless explicitly stated otherwise,
be deemed a reference to the Principal Amount of such Receivables.
(f) Any reference herein or in any other Transaction Document to a
provision of the Internal Revenue Code or ERISA shall be deemed to be also a
reference to any successor provision thereto.
(g) Any reference herein to a Schedule or Exhibit to this Agreement
shall be deemed to be a reference to such Schedule or Exhibit as it may be
amended, modified or supplemented from time to time to the extent that such
Schedule or Exhibit may be amended, modified or supplemented (or any term or
provision of any Transaction Document may be amended that would have the effect
of amending, modifying or supplementing information contained in such Schedule
or Exhibit) in compliance with the terms of the Transaction Documents.
(h) Any reference in this Agreement to any representation, warranty
or covenant "deemed" to have been made is intended to encompass only
representations, warranties or covenants that are expressly stated to be
repeated on or as of dates following the execution and delivery of this
Agreement, and no such reference shall be interpreted as a reference to any
implicit, inferred, tacit
<PAGE>
Amended and Restated Servicing Agreement 4
or otherwise unexpressed representation, warranty or covenant.
(i) The words "include", "includes" or "including" shall be
interpreted as if followed, in each case, by the phrase "without limitation".
ARTICLE II
Administration and Servicing of Receivables
SECTION 2.01. Appointment of Master Servicer, Servicers. The Company
hereby appoints LFI Servicing Corporation and the Servicers to act as, and LFI
Servicing Corporation and the Servicers hereby accept their respective
appointments and agree to act as, Master Servicer and Servicers, respectively,
under the Pooling and Servicing Agreements and the Investor Certificateholders,
by their acceptance of the Investor Certificates, consent to LFI Servicing
Corporation and the Servicers acting as Master Servicer and Servicers,
respectively. Each Servicer shall have responsibility for the management of the
servicing and receipt of collections in respect of each Receivable originated by
itself as a Seller and/or by one or more of its Affiliates as Seller(s) as
identified on Schedule 1 to the Receivables Sale Agreement (such Servicer is
sometimes referred to as the "Responsible Servicer" with respect to any
Receivable that it is responsible for servicing hereunder and such a Receivable
is sometimes referred to herein as a "Serviced Receivable" with respect to the
Servicer that is responsible for servicing such Receivable hereunder). Each
Servicer shall have the authority to make any management decisions relating to
each Serviced Receivable to the extent such authority is granted to such
Servicer under any Pooling and Servicing Agreement. LFI Servicing Corporation,
in its role as Master Servicer, shall coordinate the servicing of all
Receivables by all Servicers. The Company, the Trustee and the Holders shall
treat LFI Servicing Corporation and the Servicers as Master
<PAGE>
Amended and Restated Servicing Agreement 5
Servicer and Servicers, respectively, and may conclusively rely on the
instructions, notices and reports of LFI Servicing Corporation and the Servicers
as Master Servicer and Servicers, respectively, for so long as LFI Servicing
Corporation and the Servicers continue in their appointments as Master Servicer
and Servicers, respectively.
SECTION 2.02. Servicing Procedures. (a) Each Servicer shall manage
the servicing and administration of its Serviced Receivables, the collection of
payments due under such Serviced Receivables and charging off of any such
Serviced Receivables as uncollectible, all in accordance with its Policies and
the terms of the Pooling and Servicing Agreements. Each Servicer shall have full
power and authority, acting alone or through any party properly designated by it
hereunder, to do any and all things in connection with such servicing and
administration that it may deem necessary or desirable, but subject to the terms
of this Agreement and the other Transaction Documents. Without limiting the
generality of the foregoing and subject to Section 6.01, each Servicer or its
designee, with respect to its Serviced Receivables, and the Master Servicer or
its designee, with respect to all Receivables, is hereby authorized and
empowered (i) to execute and deliver, on behalf of the Trust for the benefit of
the Holders, any and all instruments of satisfaction or cancellation, or of
partial or full release or discharge, and all other comparable instruments, and,
after the delinquency of any such Receivable and to the extent permitted under
and in compliance with applicable Requirements of Law, to commence enforcement
proceedings with respect to such Receivable and (ii) to make any filings,
reports, notices, applications, registrations with, and to seek any consents or
authorizations from the Securities and Exchange Commission and any state
securities authority on behalf of the Trust as may be necessary or advisable to
comply with any Federal or state securities or reporting requirements or laws.
(b) Without limiting the generality of the foregoing and subject to
Section 6.01, the Master Servicer
<PAGE>
Amended and Restated Servicing Agreement 6
or its designee is hereby authorized and empowered to give written direction to
the Trustee with respect to withdrawals from, and payments to, the Collection
Account in accordance with the Daily Report and as otherwise specified in the
Pooling and Servicing Agreements.
(c) Each Servicer shall, at its cost and expense and as agent for
the Company and the Trust, use its best efforts to collect, consistent with its
past practices, as and when the same becomes due, the amount owing on each
Serviced Receivable. No Servicer shall make any material change in its
administrative, servicing and collection systems that deviates from its
Policies, except as expressly permitted by the terms of any applicable Pooling
and Servicing Agreement and after giving written notice to the Trustee. In the
event of default under any Receivable, the Responsible Servicer shall have the
power and authority, on behalf of the Company and the Trust, for the benefit of
the Holders, to take such action in respect of such Receivable as such
Responsible Servicer may deem advisable. In the enforcement or collection of any
Receivable, the Responsible Servicer shall be entitled to sue thereon in (i) its
own name or (ii) if, but only if, the Company consents in writing (which consent
shall not be unreasonably withheld), as agent for the Company. In no event shall
any Servicer be entitled to take any action that would make the Company, the
Trustee, any Agent or any Holder a party to any litigation without the express
prior written consent of such Person.
(d) Without limiting the generality of the foregoing and subject to
Section 6.01, each Servicer is hereby authorized and empowered to delegate any
or all of its servicing, collection, enforcement and administrative duties
hereunder with respect to the Serviced Receivables to a Person who agrees to
conduct such duties in accordance with such Servicer's Policies; provided,
however, that such Servicer shall give prior written notice to the Company, the
Trustee, each Agent and the Rating Agencies of any such delegation relating to a
material duty prior to such delegation being effective, such Servicer shall have
<PAGE>
Amended and Restated Servicing Agreement 7
received notice that the Rating Agency Condition shall be satisfied after giving
effect to such delegation and the consent of the Company, the Trustee and each
Agent to such delegation shall have been obtained. No delegation of duties by
any Servicer permitted hereunder shall relieve such Servicer of its liability
and responsibility with respect to such duties.
(e) Except as provided in any Pooling and Servicing Agreement, no
Servicer or any Successor Servicer shall be obligated to use separate servicing
procedures, offices, employees or accounts for servicing the Serviced
Receivables transferred to the Company (and, subsequently, to the Trust) from
the procedures, offices, employees and accounts used by such Servicer or such
Successor Servicer, as the case may be, in connection with servicing other
receivables.
(f) Each Servicer shall maintain fidelity bond or other coverage
insuring against losses through wrongdoing of its officers and employees who are
involved in the servicing of the Serviced Receivables, including depositor's
forgery, in an amount and breadth of coverage satisfactory to the Rating
Agencies and each Agent. Each Servicer shall, upon reasonable prior notice, and
as often as may reasonably be requested by any Agent, provide evidence to such
Agent of such coverage.
(g) Each Servicer shall comply with and perform its servicing
obligations with respect to the Serviced Receivables in accordance with the
contracts, if any, relating to the Serviced Receivables and its Policies.
(h) No Servicer shall take any action to cause any Serviced
Receivable not evidenced by any "instrument" (as defined in the UCC as in effect
in the State of New York) upon origination to become evidenced by an instrument
and no Servicer shall take any action to cause any interest in any Receivable to
be evidenced by any title documents in bearer form, except in connection with
its
<PAGE>
Amended and Restated Servicing Agreement 8
enforcement or collection of a Serviced Receivable, in which event such Servicer
shall deliver such instrument or title documents to the Trustee as soon as
reasonably practicable, but in no event more than five days after execution
thereof; provided that any origination of Receivables by any Servicer, in its
capacity as a Seller, in compliance with applicable Pooling and Servicing
Agreements shall not constitute a breach of this subsection 2.02(h).
SECTION 2.03. Collections. (a) Each Servicer shall have instructed
all Obligors to make all payments in respect of the Serviced Receivables to a
Lockbox or a Lockbox Account. Each of the Company and each Servicer represents,
warrants and agrees that all Collections shall be collected, processed and
deposited by it pursuant to, and in accordance with the terms of, the Pooling
and Servicing Agreements. Without limiting the generality of the foregoing, each
Servicer shall comply with the provisions of subsection 3.01(d) of the Pooling
Agreement as to remittance of funds available in any Lockbox Account. In the
event that any payments in respect of any Receivable are made directly to a
Servicer (including any employees thereof or independent contractors employed
thereby), such Servicer shall, within two Business Days of receipt thereof,
deliver (which may be via regular mail) or deposit such amounts to a Lockbox, a
Lockbox Account or the Collection Account and, prior to forwarding such amounts,
such Servicer shall hold such payments in trust as custodian for the Company and
the Trustee.
(b) Each Lockbox Agreement shall provide that the Lockbox Processor
thereunder is irrevocably directed, and such Lockbox Processor irrevocably
agrees, (i) to deposit funds received in the Lockbox directly into the Lockbox
Account and (ii) to transfer all available funds on deposit in the Lockbox
Account within one Business Day of the Business Day Received to the Trustee for
deposit in the Collection Account. Each Lockbox Agreement shall be substantially
in the form specified in the Pooling Agreement, subject to modifications thereof
as provided in
<PAGE>
Amended and Restated Servicing Agreement 9
the Pooling Agreement and applicable Supplements. Prior to any resignation of
the Lockbox Processor or termination of the Lockbox Processor by the Company or
the Trustee with respect to any Receivables, each Servicer hereby agrees (to the
extent that it is a Responsible Servicer with respect to such Receivables) to
obtain a replacement Lockbox Processor. Upon satisfaction of the Rating Agency
Condition and the consent of the Trustee (which shall not be unreasonably
withheld), a Servicer may enter into any amendments or modifications of a
Lockbox Agreement that the Servicer reasonably deems necessary to conform such
Lockbox Agreement to the cash management system of the Company or the
Responsible Servicer(s).
(c) The Trustee shall administer amounts on deposit in the
Collection Account in accordance with the terms of the Pooling and Servicing
Agreements. Each of the Company, the Master Servicer and each Servicer
acknowledges and agrees that (i) it shall not have any right to withdraw any
funds on deposit in the Collection Account or any Lockbox Account and (ii) all
amounts deposited in the Collection Account or any Lockbox Account shall be
under the sole dominion and control of the Trustee (subject to the Master
Servicer's or Servicers' rights to direct the application of any such amounts as
provided by the terms of any Pooling and Servicing Agreement).
(d) As soon as practicable, but in any event not later than the
Business Day following the date that a Servicer identifies any of the collected
funds received in the Collection Account as funds that do not constitute
Collections on account of the Receivables, such moneys that do not constitute
such Collections shall be remitted to the Master Servicer and then by the Master
Servicer to the appropriate Seller.
(e) Unless otherwise required by law or unless an Obligor designates
that a payment be applied to a specific Receivable, all Collections received
from an Obligor shall be applied to the oldest Receivables of such Obligor.
<PAGE>
Amended and Restated Servicing Agreement 10
SECTION 2.04. Reconciliation of Deposits. If in respect of
Collections on account of a Receivable the Responsible Servicer deposits into
the Collection Account (a) a check that is not honored for any reason or (b) an
amount that is less than or more than the actual amount of such Collections,
such Servicer shall, in lieu of making a reconciling withdrawal or deposit, as
the case may be, adjust the amount subsequently deposited into such Collection
Account to reflect such dishonored check or mistake. Any Receivable in respect
of which a dishonored check is received shall be deemed not to have been paid;
provided, that no adjustments made pursuant to this Section 2.04 shall change
any amount previously reported pursuant to Section 4.02.
SECTION 2.05. Servicing Compensation. (a) As full compensation for
the Servicers' servicing activities hereunder and reimbursement for their
expenses as set forth in subsection 2.05(b), the Master Servicer, on behalf of
the Servicers, shall be entitled to receive on each Distribution Date, for the
preceding Settlement Period prior to the termination of the Trust pursuant to
Section 9.01 of the Pooling Agreement, a servicing fee (the "Servicing Fee").
The Servicing Fee shall be an amount equal to (i) the product of (A) the
Servicing Fee Percentage and (B) the average aggregate Principal Amount of the
Receivables in the Trust for such Settlement Period and (C) the number of days
in such Settlement Period, divided by (ii) 360. Except as otherwise set forth in
the related Supplement, the share of the Servicing Fee allocable to each
Outstanding Series for any Settlement Period shall be an amount equal to the
product of (i) the Servicing Fee for such Settlement Period and (ii) a fraction
(expressed as a percentage) (A) the numerator of which is the daily average
Invested Amount for such Settlement Period with respect to such Outstanding
Series and (B) the denominator of which is the daily average Aggregate Invested
Amount for such Settlement Period (with respect to any such Series, the "Monthly
Servicing Fee"); provided, however, that if on any day a Seller or any Affiliate
thereof is acting as a Servicer and an Early
<PAGE>
Amended and Restated Servicing Agreement 11
Amortization Event has occurred and is continuing with respect to any
Outstanding Series, the portion of the Monthly Servicing Fee payable to a Seller
or an Affiliate thereof with respect to such Outstanding Series shall be
deferred until all amounts due under the Investor Certificates of such
Outstanding Series have been paid in full. The Servicing Fee shall be payable to
the Master Servicer, on behalf of the Servicers, solely pursuant to the terms
of, and to the extent amounts are available for payment under, Article III of
the Pooling Agreement.
(b) The Company hereby directs the Master Servicer and each Servicer
to pay amounts due to the Trustee pursuant to Section 8.05 of the Pooling
Agreement and the reasonable fees and disbursements of independent accountants,
and all other reasonable fees and expenses of the Trust (including counsel fees,
if any) not expressly stated herein to be for the account of the Holders;
provided however, that in no event shall the Master Servicer, any Servicer or
the Trustee be liable for any Federal, state or local income or franchise tax,
or any interest or penalties with respect thereto, assessed on the Trust or the
Holders except in accordance with Section 5.02 and as otherwise expressly
provided herein. Notwithstanding anything to the contrary herein or in any other
Pooling and Servicing Agreement, in the event that the Master Servicer or any
Servicer fails to pay any amount due to the Trustee pursuant to Section 8.05 of
the Pooling Agreement, or following the commencement and continuation of an
Early Amortization Period, the Trustee shall be entitled, in addition to any
other rights it may have under law and under the Pooling Agreement, to receive
directly such amounts owing to it under the Pooling and Servicing Agreements
from, and in the same order of priority as, the Servicing Fee before payment to
the Master Servicer, for the benefit of the Servicers, of any portion thereof;
provided, that in the event any Servicer shall have elected to waive its rights
to payment of its portion of the Servicing Fee or the Servicing Fee is deferred
pursuant to subsection 2.05(a), the Trustee shall nonetheless be entitled to
receive such amounts from
<PAGE>
Amended and Restated Servicing Agreement 12
payments that would ordinarily be applied to the payment of the Servicing Fee,
in the same order of priority as though such portion of the Servicing Fee were
payable. Each Servicer shall be required to pay expenses for its own account,
and shall not be entitled to any payment therefor other than its portion of the
Servicing Fee. Nothing contained herein shall be construed to limit the
obligation of the Master Servicer, each Servicer or the Company to pay any
amounts due the Trustee pursuant to Section 8.05 of the Pooling Agreement.
ARTICLE III
Representations and Warranties of the
Master Servicer and the Servicers
As of (a) the date hereof and (b) each Issuance Date, each of the
Master Servicer and each Servicer hereby makes the following representations and
warranties to each of the other parties hereto:
SECTION 3.01. Organization; Powers. It (i) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (ii) has all requisite power and authority to
own its property and assets and to carry on its business as now conducted and as
proposed to be conducted, (iii) is qualified to do business in, and is in good
standing in, every jurisdiction where the nature of its business so requires,
except where the failure so to qualify could not reasonably be expected to
result in a Servicer Material Adverse Effect and (iv) has the corporate power
and authority to execute, deliver and perform its obligations under each of the
Transaction Documents and each other agreement or instrument contemplated hereby
to which it is or will be a party.
SECTION 3.02. Authorization; No Conflict. The execution, delivery
and performance by it of each of the Transaction Documents that it is a party to
and the other
<PAGE>
Amended and Restated Servicing Agreement 13
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
(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 their property is or may be bound, (B)
be in conflict with, result in a breach of or constitute (alone or with notice
or lapse of time or both) a default under, or give rise to any right to
accelerate or to require the prepayment, repurchase or redemption of any
obligation under any such Contractual Obligation, except where any such
conflict, violation, breach or default referred to in clause (A) or (B),
individually or in the aggregate, could not reasonably be expected to have a
Servicer Material Adverse Effect, or (C) result in the creation or imposition of
any Lien upon or with respect to any property or assets now owned or hereafter
acquired by it or any Subsidiary (other than any Lien created hereunder or
contemplated or permitted hereby).
SECTION 3.03. Enforceability. This Agreement has been duly executed
and delivered by it and constitutes, and each other Transaction Document to
which it is a party when executed and delivered by it will constitute, its
legal, valid and binding obligation enforceable against it in accordance with
such document's terms, subject (a) as to enforcement of remedies, to applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the enforcement of creditors' rights generally, from time to time in
effect and (b) to general principals of equity (whether enforcement is sought by
a proceeding in equity or at law).
SECTION 3.04. Governmental Approvals. No action, consent or approval
of, registration or filing with or any other action by any Governmental
Authority is or will be required in connection with the Transactions, except for
(i) the filing of Uniform Commercial Code financing statements and (ii) such as
have been made or obtained and
<PAGE>
Amended and Restated Servicing Agreement 14
are in full force and effect; provided, however, that with respect to
Receivables owing by Government Obligors, any failure by it to comply with the
United States Federal Nonassignment Act (Public Contracts), 41 U.S.C. ss. 15, or
Assignment of Claims Act, 31 U.S.C. ss. 3727, or with any similar legislation of
any State shall not constitute a breach of this Section 3.04.
SECTION 3.05. Litigation; Compliance with Laws. (i) There are no
actions, suits or proceedings at law or in equity or by or before any
Governmental Authority now pending or, to its knowledge, threatened against or
affecting it or any Subsidiary or any business, property or rights of any such
Person (A) that involve any Transaction Document or the Transactions or (B) as
to which there is a reasonable possibility of an adverse determination and that,
if adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Servicer Material Adverse Effect.
(ii) Neither it nor any Subsidiary is in default with respect to any
judgment, writ, injunction, decree or order of any Governmental Authority, where
such violation or default could reasonably be expected to result in a Servicer
Material Adverse Effect.
SECTION 3.06. Agreements. (i) Neither it nor any Subsidiary is a
party to any agreement or instrument or subject to any corporate restriction
that has resulted or could reasonably be expected to result in a Servicer
Material Adverse Effect.
(ii) Neither it nor any Subsidiary is in default in any manner under
any provision of any Contractual Obligation to which it is a party or by which
it or any of its properties or assets are bound, where such default could
reasonably be expected to result in a Servicer Material Adverse Effect.
<PAGE>
Amended and Restated Servicing Agreement 15
SECTION 3.07. No Servicer Default. No Servicer Default or Potential
Servicer Default has occurred and is continuing.
SECTION 3.08. Servicing Ability. As of the related Issuance Date,
there has not been since the date of this Agreement any adverse change in its
ability to perform its obligations as Master Servicer or Servicer, as
applicable, under any Transaction Document to which it is a party.
SECTION 3.09. Location of Records. The office at which it keeps its
records concerning any Receivables either (i) is located at the address set
forth for it on Schedule 1 to the Receivables Sale Agreement or (ii) has been
notified to the Company and the Trustee in accordance with the provisions of
Section 4.08. Its chief executive office is located at such location and such
office is the place where it is "located" for the purposes of Section
9-103(3)(d) of the UCC as in effect in the State of New York.
SECTION 3.10. Insurance. Each Servicer has fidelity bond or other
coverage in full force and effect insuring against losses through wrongdoing of
its officers and employees who are involved in the servicing of Receivables,
including coverage of depositor's forgery, in an amount at least equal to and
with breadth of coverage at least as comprehensive as the coverage indicated on
Exhibit C and with the insurers indicated on Exhibit C.
ARTICLE IV
Covenants of the Master Servicer and the Servicers
SECTION 4.01. Delivery of Daily Reports. Unless otherwise specified
in the Supplement with respect to any Series, for each Business Day (the
"Reported Day") and with respect to each Outstanding Series, the Master Servicer
shall submit to the Company, the Trustee and the relevant
<PAGE>
Amended and Restated Servicing Agreement 16
Agent no later than 1:30 p.m., New York City time, on the next Business Day
following each Reported Day, a written report substantially in the form attached
to the related Supplement for each such Series (the "Daily Report") setting
forth for the Reported Day total Collections on the Receivables, the amount of
Collections attributable to previously identified Ineligible Receivables for
which an Adjustment Payment and a Seller Adjustment Payment have been made
pursuant to the Pooling Agreement and the Receivables Sale Agreement,
respectively (which are payable by the appropriate Seller in accordance with
subsection 2.06(a) of the Receivables Sale Agreement), the amount of Receivables
originated, the amount of Ineligible Receivables (if any) identified on the
Reported Day, and such other information as the Company, the Trustee or such
Agent may reasonably request. The Daily Report may be delivered in an electronic
format mutually agreed upon by the Master Servicer and the Trustee, or pending
such agreement, by facsimile. By delivery of a Daily Report, the Master Servicer
shall be deemed to have made a representation and warranty that all information
set forth therein is true and correct in all material respects.
SECTION 4.02. Delivery of Monthly Settlement Statement. Unless
otherwise specified in the Supplement with respect to any Outstanding Series,
the Master Servicer hereby covenants and agrees that it shall deliver to the
Company, the Trustee, the relevant Agent and each Rating Agency by 11:00 a.m.,
New York City time, on each Settlement Report Date, a certificate of a
Responsible Officer of the Master Servicer substantially in the form attached to
the related Supplement for each such Outstanding Series (a "Monthly Settlement
Statement") setting forth, as of the last day of the Settlement Period most
recently ended and for such Settlement Period, (a) the information described in
the form of such Monthly Settlement Statement with such changes as may be agreed
to by the Master Servicer, the Company, the Trustee and the relevant Agent (if
any) and subject to satisfaction of the Rating Agency Condition and (b) such
other information as the Trustee or the relevant
<PAGE>
Amended and Restated Servicing Agreement 17
Agent may reasonably request. Such certificate shall include a certification by
a Responsible Officer of the Master Servicer that, to such Responsible Officer's
knowledge, the information contained therein is true and correct in all material
respects and each of the Master Servicer and each Servicer has performed all of
its respective obligations in all material respects under each Transaction
Document to which it is a party throughout such preceding Settlement Period (or,
if there has been a default in the performance of any such obligation,
specifying each such default known to such Responsible Officer and the nature
and status thereof). A copy of each Monthly Settlement Statement may be obtained
by any Holder by a request in writing to the Trustee addressed to the Corporate
Trust Office.
SECTION 4.03. Delivery of Annual Master Servicer's and Servicers'
Certificates. Each of the Master Servicer and each Servicer shall deliver to the
Company, the Trustee, each Agent and each Rating Agency, a certificate of a
Responsible Officer of the Master Servicer or such Servicer, as applicable,
substantially in the form of Exhibit A hereto, certifying that:
(a) a review of its activities during the preceding calendar year
and of its performance under each Transaction Document was made under the
supervision of such Responsible Officer;
(b) to such Responsible Officer's knowledge, based on such review,
it has performed its obligations in all material respects under each
Transaction Document throughout the period covered by such certificate
(or, if there has been a material default in the performance of any such
obligation, specifying each such default known to such Responsible Officer
and the nature and status thereof); and
(c) in the case of the certificate of a Responsible Officer of the
Master Servicer, each Daily
<PAGE>
Amended and Restated Servicing Agreement 18
Report and Monthly Settlement Statement was accurate and correct in all
material respects.
Such certificate shall be delivered by the Master Servicer and each Servicer
within 90 days after the end of each calendar year commencing with the year
ending December 31, 1997. A copy of each such certificate may be obtained by any
Holder by a request in writing to the Trustee addressed to the Corporate Trust
Office.
SECTION 4.04. Delivery of Independent Public Accountants' Servicing
Reports. Each of the Master Servicer and each Servicer shall cause Independent
Public Accountants to furnish to the Company, the Trustee, each Agent and each
Rating Agency within 120 days following the last day of each of its fiscal years
a letter to the effect that such firm has performed certain agreed-upon
procedures (as set forth in Exhibit B hereto) relating to it and its performance
hereunder during the preceding fiscal year and describing such accountants'
findings with respect to such procedures. A copy of such report may be obtained
by any Holder by a request in writing to the Trustee addressed to the Corporate
Trust Office.
SECTION 4.05. Extension, Amendment and Adjustment of Receivables;
Amendment of Policies. (a) Each Servicer hereby covenants and agrees with the
Company and the Trustee that it shall not extend, rescind, cancel, amend or
otherwise modify, or attempt or purport to extend, rescind, cancel, amend or
otherwise modify, the terms of, or grant any Dilution Adjustment to, any
Serviced Receivable, or otherwise take any action that is intended to cause or
permit a Serviced Receivable that is an Eligible Receivable to cease to be an
Eligible Receivable, except in any such case (i) in accordance with the terms of
its Policies, (ii) as required by any Requirement of Law or (iii) in the case of
any Dilution Adjustments, upon the payment by or on behalf of the appropriate
Seller of a Seller Adjustment Payment pursuant to Section 2.05 of the
Receivables Sale Agreement. Any Dilution Adjustment authorized to be made
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Amended and Restated Servicing Agreement 19
pursuant to the preceding sentence shall result in the reduction, on the
Business Day on which such Dilution Adjustment arises or is identified, in the
aggregate Principal Amount of Receivables and if as a result of such a reduction
the Aggregate Target Receivables Amount exceeds the Aggregate Receivables
Amount, the Company (in addition to the obligations of the Sellers under the
Receivables Sale Agreement in respect of such Dilution Adjustment) shall be
required to pay into the Series Principal Collection Sub- subaccount with
respect to each Outstanding Series in immediately available funds, within one
Business Day of such determination, the pro rata share for such Series of the
amount (the "Cash Dilution Payment") by which the Aggregate Target Receivables
Amount exceeds the Aggregate Receivables Amount.
(b) No Servicer shall change or modify its Policies in any material
respect, except (i) if such change or modification is necessary under any
Requirement of Law or (ii) if the Rating Agency Condition is satisfied with
respect thereto. Each Servicer shall provide notice to the Company, the Trustee,
each Agent and each Rating Agency of any change or modification of its Policies;
provided, however, that if any change or modification, other than a change or
modification permitted pursuant to clause (i) above, would be reasonably likely
to have a Material Adverse Effect on the interests of the Investor
Certificateholders of a Series that is not rated by a Rating Agency, the consent
of the applicable Agent (or if none, as specified in the related Supplement)
shall be required to effect such change or modification.
SECTION 4.06. Protection of Holders' Rights. Each Servicer hereby
agrees with the Company and the Trustee that it shall take no action, nor
intentionally omit to take any action, that could reasonably be expected to
adversely impair the rights, remedies or interests of the Holders under the
Transaction Documents in respect of the Serviced Receivables or any Related
Property nor shall it reschedule, revise or defer payments due on any Serviced
Receivable
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Amended and Restated Servicing Agreement 20
except in accordance with its Policies or Section 4.05 above.
SECTION 4.07. Security Interest. Each Servicer hereby covenants and
agrees that it shall not sell, pledge, assign or transfer to any other Person,
or grant, create, incur, assume or suffer to exist any Lien on, any Serviced
Receivable, whether now existing or hereafter created, or any interest therein,
and each Servicer shall defend the right, title and interest of the Company and
the Trust in, to and under any Serviced Receivable, whether now existing or
hereafter created, against all claims of third parties claiming through or under
such Servicer or the Company; provided, however, that nothing in this Section
4.07 shall prevent or be deemed to prohibit a Servicer from suffering to exist
upon any of the Serviced Receivables any Permitted Liens described in clause (i)
or (ii) of the definition thereof.
SECTION 4.08. Location of Records. Each of the Master Servicer and
each Servicer hereby covenants and agrees that it (a) shall not move its chief
executive office or any of the offices where it keeps its records with respect
to any Receivables outside of the location specified in respect thereof on
Schedule 1 to the Receivables Sale Agreement, in any such case, without giving
30 days prior written notice to the Company, the Trustee, each Agent and the
Rating Agencies and (b) shall promptly take all actions (including any filings
under the UCC) required or reasonably necessary in order to continue the valid
and enforceable interest of the Company and the Trust in all Receivables.
SECTION 4.09. Visitation Rights. (a) Each of the Master Servicer and
each Servicer shall, at any reasonable time during normal business hours on any
Business Day and from time to time, upon reasonable prior notice, and as often
as may reasonably be requested, subject to its security and confidentiality
requirements, (i) permit the Company, the Trustee, any Agent or any of their
respective agents or representatives, (A) to examine and make copies of
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Amended and Restated Servicing Agreement 21
and abstracts from its records, books of account and documents (including
computer tapes and disks) relating to the Receivables or the Serviced
Receivables, as the case may be, and (B) following the termination of its
appointment as Master Servicer or Servicer, as the case may be, to be present at
its offices and properties to administer and control the Collection of the
Receivables or the Serviced Receivables, as the case may be, and to allow the
Trustee access to documents, instruments and other records (including the
documents, instruments and other records required to be transferred to a
successor pursuant to Section 6.01 upon a Master Service Transfer or Service
Transfer, as the case may be), equipment and personnel that are necessary to
enable a Successor Master Servicer to continue master servicing operations or a
Successor Servicer to continue servicing operations, as the case may be, in
accordance with the terms of the Transaction Documents and (ii) permit the
Company, the Trustee, any Agent or any of their respective agents or
representatives to visit its properties to discuss its affairs, finances and
accounts relating to the Receivables or the Serviced Receivables, as the case
may be, or its performance hereunder or under any of the other Transaction
Documents to which it is a party with any of its officers or directors and with
its Independent Public Accountants; provided, that the Company, the Trustee or
the Agent, as the case may be, shall notify it prior to any contact with such
accountants and shall give it the opportunity to participate in such
discussions.
(b) Each of the Master Servicer and each Servicer shall provide the
Trustee with such other information as the Trustee may reasonably request in
connection with the fulfillment of the Trustee's obligations under any Pooling
and Servicing Agreement.
SECTION 4.10. Lockbox Agreement; Lockbox Accounts. The Master
Servicer and each Servicer shall (a) maintain, and keep in full force and
effect, each Lockbox Agreement to which it is a party, except to the extent
otherwise permitted under the terms of the
<PAGE>
Amended and Restated Servicing Agreement 22
Transaction Documents, and (b) take all reasonable actions necessary to ensure
that each related Lockbox Account shall be free and clear of, and defend each
such Lockbox Account against, any writ, order, stay, judgment, warrant of
attachment or execution or similar process; provided, however, that upon
satisfaction of the Rating Agency Condition and the consent of the Trustee
(which shall not be unreasonably withheld), the Company may enter into any
amendments to or modifications of a Lockbox Agreement that the Company
reasonably deems necessary to conform such Lockbox Agreement to the cash
management system of the Company or the Responsible Servicer(s).
SECTION 4.11. Delivery of Financial Statements. The Master Servicer
shall furnish to the Company, the Trustee, each Agent and the Rating Agencies:
(a) within 90 days after the end of each fiscal year, Furnishings
International Inc.'s consolidated balance sheet and related statements of
income, stockholders' equity and cash flows showing the consolidated
financial condition of Furnishings International Inc. and its consolidated
subsidiaries as of the close of such fiscal year and the consolidated
results of its operations and the operations of such subsidiaries during
such year (and showing, on a comparative basis, the figures for the
previous year), all audited by Ernst & Young LLP, Coopers and Lybrand LLP
or other independent public accountants of recognized national standing
acceptable to the Required Lenders (as defined in the Credit Agreement)
and accompanied by an opinion of such accountants (which shall not be
qualified in any material respect) to the effect that such consolidated
financial statements fairly present in all material respects the financial
condition and results of operations of Furnishings International Inc. and
its consolidated subsidiaries on a consolidated basis in accordance with
GAAP consistently applied;
<PAGE>
Amended and Restated Servicing Agreement 23
(b) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year, Furnishings International Inc.'s unaudited
consolidated balance sheet and related statements of income, stockholders'
equity and cash flows showing the consolidated financial condition of
Furnishings International Inc. and its consolidated subsidiaries as of the
close of such fiscal quarter and the consolidated results of its
operations and the operations of such subsidiaries during such fiscal
quarter and the then elapsed portion of the fiscal year (and showing, on a
comparative basis, such information as of and for the corresponding dates
and periods of the preceding fiscal year), all certified by a Financial
Officer (as defined in the Credit Agreement) of Furnishings International
Inc. as fairly presenting in all material respects the consolidated
financial condition and results of operations of Furnishings International
Inc. and its consolidated subsidiaries on a consolidated basis in
accordance with GAAP (except for the absence of footnote disclosure)
consistently applied, subject to year-end audit adjustments;
(c) within 30 days after the end of each month (other than the last
month of any fiscal quarter), Furnishings International Inc.'s unaudited
consolidated balance sheet and related statements of income, stockholders'
equity and cash flows, showing the consolidated financial condition of
Furnishings International Inc. and its consolidated subsidiaries as of the
close of such month and the consolidated results of its operations and the
operations of such subsidiaries during such month and the then-elapsed
portion of the fiscal year;
(d) concurrently with any delivery of financial statements under
sub-paragraph (a) or (b) above, a certificate of the Financial Officer
certifying such statements;
<PAGE>
Amended and Restated Servicing Agreement 24
(e) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by
Furnishings International Inc., any Servicer or any Subsidiary with the
Securities and Exchange Commission, or any Governmental Authority
succeeding to any or all of the functions of said Commission, or with any
national securities exchange, or distributed to its shareholders
generally, as the case may be; and
(f) promptly, from time to time, such other information regarding
the operations, business affairs and financial condition of Furnishings
International Inc., any Servicer or any Subsidiary, or compliance with the
terms of any Transaction Document, in each case as the Agent or any Holder
may reasonably request.
SECTION 4.12. Notices. Each of the Master Servicer and each Servicer
shall furnish to the Company, the Trustee, each Agent and each Rating Agency,
promptly upon obtaining knowledge of the occurrence of any Purchase Termination
Event, Potential Purchase Termination Event, Early Amortization Event, Potential
Early Amortization Event or Servicer Default, written notice thereof.
SECTION 4.13. Insurance. Each Servicer hereby covenants and agrees
that it shall maintain in full force and effect fidelity bond or other coverage
insuring against losses through wrongdoing of its officers and employees who are
involved in the servicing of Receivables, including coverage of depositor's
forgery, in an amount at least equal to and with breadth of coverage at least as
comprehensive as the coverage indicated on Exhibit C and with insurers having a
claims-paying ability substantially comparable to the insurers indicated on
Exhibit C.
<PAGE>
Amended and Restated Servicing Agreement 25
ARTICLE V
Other Matters Relating to the
Master Servicer and the Servicers
SECTION 5.01. Merger, Consolidation, etc. Neither the Master
Servicer nor any Servicer shall enter into any merger, consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or make any material change in its present method
of conducting business, or convey, sell, transfer, lease, assign or otherwise
dispose of, all or substantially all of its property, business or assets other
than the assignments and transfers contemplated hereby; provided that the Master
Servicer or any Servicer may merge into or consolidate with any other
corporation or convey, sell or transfer its property, business or assets
substantially as an entirety to another Person, if:
(a) the corporation into which it is merged or the corporation
formed by such consolidation or the Person that acquires by conveyance,
sale or transfer its property, business or assets substantially as an
entirety shall be a corporation organized and existing under the laws of
the United States of America or any State or the District of Columbia,
and, if it is not the surviving entity, such corporation shall assume,
without the execution or filing of any paper or any further act on the
part of any of the parties hereto, the performance of every one of its
covenants and obligations hereunder; and
(b) it has delivered to the Trustee an officer's certificate
executed by a Vice President or other senior officer and an Opinion of
Counsel addressed to the Trust and the Trustee each stating that such
consolidation, merger, conveyance or transfer complies with this Section
5.01 and an officer's certificate executed by a Vice President or other
senior officer stating that all conditions precedent herein provided
<PAGE>
Amended and Restated Servicing Agreement 26
for relating to such transaction have been complied with.
SECTION 5.02. Indemnification of the Trust and the Trustee. (a) Each
of the Master Servicer and the Servicer hereby agrees to indemnify and hold
harmless the Company, the Trustee for the benefit of the Holders and the Trustee
and their respective directors, officers, agents and employees (an "Indemnified
Person") from and against any loss, liability, expense, damage or injury
suffered or sustained by reason of any acts, omissions or alleged acts or
omissions arising out of, or relating to, its activities pursuant to any Pooling
and Servicing Agreement to which it is a party, including but not limited to any
judgment, award, settlement, reasonable attorneys' fees and other reasonable
costs or expenses incurred in connection with the defense of any actual or
threatened action, proceeding or claim; provided that neither the Master
Servicer nor any Servicer shall indemnify any Indemnified Person for any
liability, cost or expense of such Indemnified Person (i) arising solely from a
default by an Obligor with respect to any Receivable (except that
indemnification shall be made to the extent that such default arises out of its
failure to perform its duties or obligations under this Agreement), or (ii) to
the extent that such liability, cost or expense arises from the gross
negligence, bad faith or wilful misconduct of such Indemnified Person (or any of
its respective directors, officers, agents or employees). The provisions of this
indemnity shall run directly to, and be enforceable by, an injured party and
shall survive the termination of the Agreement or the resignation of the Master
Servicer or Servicer, as the case may be.
(b) In addition to and without giving effect to any limitations set
forth in subsection (a) above, each Servicer shall indemnify and hold harmless
each Indemnified Person from and against any loss, liability, expense, damage or
injury suffered or sustained by reason of a breach by such Servicer of any
covenant contained in subsections 2.02(g) or 2.02(h) or Sections 4.05, 4.06 or
4.07 that
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Amended and Restated Servicing Agreement 27
adversely affects the interest of the Company or the Holders under the
Transaction Documents with respect to any Serviced Receivable (an
"Indemnification Event"), in an amount equal to the outstanding Principal Amount
at such time of such Receivable. Payment shall occur on or prior to the 30th
Business Day after the day such Indemnification Event becomes known to such
Servicer unless such Indemnification Event shall have been cured on or before
such day.
SECTION 5.03. Master Servicer and Servicers Not to Resign. Neither
the Master Servicer nor any Servicer shall resign from the obligations and
duties hereby imposed on it except upon determination that (a) the performance
of its duties hereunder is no longer permissible under applicable law, and (b)
there is no reasonable course of action that it could take to make the
performance of its duties hereunder permissible under applicable law. Any such
determination permitting the resignation of the Master Servicer or any Servicer
shall be evidenced as to clause (a) above by an Opinion of Counsel to such
effect delivered to the Company, the Trustee and each Agent. No such resignation
shall become effective until a Successor Master Servicer or Successor Servicer,
as the case may be, or the Trustee shall have assumed the responsibilities and
obligations of the Master Servicer or such Servicer in accordance with Section
6.02. The Trustee, the Company, each Agent and each Rating Agency (and, in the
case of the resignation of any Servicer, the Master Servicer) shall be notified
of such resignation by the resigning Person.
SECTION 5.04. Access to Certain Documentation and Information
Regarding the Receivables. Each Servicer shall hold in trust for the Company and
the Trustee at the office of such Servicer such computer programs, books of
account and other records as are reasonably necessary to enable the Trustee to
determine at any time the status of the Serviced Receivables and all collections
and payments in respect thereof (including, without limitation, an ability to
recreate records evidencing the Serviced Receivables in the event of the
destruction of the originals thereof).
<PAGE>
Amended and Restated Servicing Agreement 28
ARTICLE VI
Servicer Defaults;
Servicer Termination
SECTION 6.01. Servicer Defaults. If any one of the following events
(a "Servicer Default") shall occur and be continuing with respect to the Master
Servicer or one or more Servicers, as the case may be:
(a) failure by the Master Servicer to deliver, within two Business
Days of the earlier date set forth below in clause (i) or (ii), any Daily
Report or, within three Business Days of the earlier date set forth below
in clause (i) or (ii), any Monthly Settlement Statement conforming in all
material respects to the requirement of Section 4.01 or 4.02, as the case
may be, in each case, after the earlier to occur of (i) the date upon
which a Responsible Officer of the Master Servicer obtains knowledge of
such failure or (ii) the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Master
Servicer by the Company or the Trustee, or to the Company, the Master
Servicer and the Trustee from holders of Investor Certificates evidencing
25% or more of the Aggregate Invested Amount or by any Agent;
(b) failure by the Master Servicer or any Servicer to pay any amount
required to be paid by it under any Pooling and Servicing Agreement on or
before the date occurring five Business Days after the earlier to occur of
(i) the date upon which a Responsible Officer of the Master Servicer or
such Servicer obtains knowledge of such failure or (ii) the date on which
written notice of such failure, requiring the same to be remedied, shall
have been given (A) (I) in the case of a failure on the part of the Master
Servicer, to the Master Servicer or (II) in the case of a failure on the
part of any Servicer, to the Master Servicer or such
<PAGE>
Amended and Restated Servicing Agreement 29
Servicer, by the Company or the Trustee, or (B) to the Company, to the
Trustee and (I) in the case of a failure on the part of the Master
Servicer, to the Master Servicer or (II) in the case of a failure on the
part of any Servicer, to the Master Servicer or such Servicer by holders
of Investor Certificates evidencing 25% or more of the Aggregate Invested
Amount or by any Agent;
(c) failure on the part of the Master Servicer or any Servicer duly
to observe or to perform any other of its covenants or agreements set
forth in any Pooling and Servicing Agreement that has an adverse effect on
the holders of any Outstanding Series and that continues unremedied until
30 days after the date on which written notice of such failure, requiring
the same to be remedied, shall have been given (A) (I) in the case of a
failure on the part of the Master Servicer, to the Master Servicer or (II)
in the case of a failure on the part of any Servicer, to the Master
Servicer or such Servicer, by the Company or the Trustee, or (B) to the
Company, to the Trustee and (I) in the case of a failure on the part of
the Master Servicer, to the Master Servicer or (II) in the case of a
failure on the part of any Servicer, to the Master Servicer or such
Servicer by holders of Investor Certificates evidencing 25% or more of the
Aggregate Invested Amount or by any Agent; provided, that no Servicer
Default shall be deemed to occur under this subsection with respect to a
failure on the part of any Servicer if such Servicer shall have complied
with the provisions of Section 5.02(b) with respect thereto;
(d) any representation, warranty or certification made by the Master
Servicer or any Servicer in any Pooling and Servicing Agreement or in any
certificate delivered pursuant thereto shall prove to have been incorrect
in any material respect when made or deemed made, which incorrectness has
an adverse effect on the holders of any Outstanding Series and which
adverse
<PAGE>
Amended and Restated Servicing Agreement 30
effect continues unremedied until 30 days after the date on which written
notice thereof, requiring the same to be remedied, shall have been given
(A) (I) in the case of a failure on the part of the Master Servicer, to
the Master Servicer or (II) in the case of a failure on the part of any
Servicer, to the Master Servicer or such Servicer, by the Company or the
Trustee, or (B) to the Company, to the Trustee and (I) in the case of a
failure on the part of the Master Servicer, to the Master Servicer or (II)
in the case of a failure on the part of any Servicer, to the Master
Servicer or such Servicer by holders of Investor Certificates evidencing
25% or more of the Aggregate Invested Amount or by any Agent; provided,
that no Servicer Default shall be deemed to occur under this subsection
with respect to a failure on the part of any Servicer if such Servicer
shall have complied with the provisions of Section 5.02(b) with respect
thereto;
(e)(i) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Master Servicer or any
Servicer in an involuntary case under any Applicable Insolvency Law, which
decree or order is not stayed, or any other similar relief shall be
granted under any applicable Federal or state law and shall not be stayed;
(ii) an involuntary case is commenced against the Master Servicer or any
Servicer under any Applicable Insolvency Law, a decree or order of a court
having jurisdiction in the premises for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer having
similar powers over the Master Servicer or any Servicer, or over all or a
substantial part of the property of the Master Servicer or any Servicer
shall have been entered, an interim receiver, trustee or other custodian
of the Master Servicer or any Servicer for all or a substantial part of
the property of the Master Servicer or such Servicer is involuntarily
appointed or a warrant of attachment, execution or similar process is
issued against any substantial part
<PAGE>
Amended and Restated Servicing Agreement 31
of the property of the Master Servicer or any Servicer, and the
continuance of any such events in this clause (ii) for 60 days unless
dismissed, bonded or discharged; (iii) the Master Servicer or any Servicer
shall at its request have a decree or an order for relief entered with
respect to it, commence a voluntary case under the Bankruptcy Code or any
Applicable Insolvency Law, consent to the entry of a decree or an order
for relief in an involuntary case, or to the conversion of an involuntary
case to a voluntary case, under any such law, or consent to the
appointment of or taking possession by a receiver, trustee or other
custodian of all or a substantial part of its property; (iv) the making by
the Master Servicer or any Servicer of any general assignment for the
benefit of creditors; (v) the inability or failure of the Master Servicer
or any Servicer generally to pay its debts as such debts become due; or
(vi) the Board of Directors of the Master Servicer or any Servicer adopts
any resolution or otherwise authorizes action to approve any of the
foregoing; or
(f) there shall have occurred and be continuing a Purchase
Termination Event under the Receivables Sale Agreement affecting any
Serviced Receivables of such Servicer;
then, in the event of any Servicer Default, so long as the Servicer Default
shall not have been remedied or waived, the Company (with the consent of the
Trustee) may, the Company at the direction of the Trustee shall, and the Company
and the Trustee shall, at the written direction of the holders of Investor
Certificates evidencing more than 50% of the Aggregate Invested Amount voting as
a single class, by notice then given in writing to the Master Servicer, to each
Rating Agency and, if the Servicer Default relates to a default on the part of
any Servicer, to such Servicer (a "Termination Notice"), terminate all or any
part of the rights and obligations of the Master Servicer or such Servicer, as
the case may be, under the Pooling and
<PAGE>
Amended and Restated Servicing Agreement 32
Servicing Agreements. Notwithstanding anything to the contrary in this Section
6.01, a delay in or failure of performance referred to under clause (b) above
for a period of 10 Business Days after the applicable grace period or a delay in
or failure of performance referred to under clauses (a), (c) or (d) above for a
period of 30 Business Days after the applicable grace period shall not
constitute a Servicer Default, if such delay or failure could not have been
prevented by the exercise of reasonable diligence by the Master Servicer or such
Servicer and such delay or failure was caused by a Force Majeure Delay. After
receipt by the Master Servicer or a Servicer of a Termination Notice, and on the
date that a Successor Master Servicer or Successor Servicer, as the case may be,
shall have been appointed by the Company and the Trustee pursuant to Section
6.02, all authority and power of the Master Servicer or such Servicer, as the
case may be, under any Pooling and Servicing Agreement to the extent specified
in such Termination Notice shall pass to and be vested in the Successor Master
Servicer (a "Master Service Transfer") or a Successor Servicer (a "Service
Transfer"), as the case may be; and, without limitation, the Trustee is hereby
directed, authorized and empowered (upon the failure of the Master Servicer or
such Servicer to cooperate) to execute and deliver, on behalf of the Master
Servicer or such Servicer, as attorney-in-fact or otherwise, all documents and
other instruments upon the failure of the Master Servicer or such Servicer to
execute or to deliver such documents or instruments, and to do and to accomplish
all other acts or things necessary or appropriate to effect the purposes of such
Master Service Transfer or Service Transfer and the Trustee shall incur no
liability in connection with effecting such Master Service Transfer or Service
Transfer. Each of the Master Servicer and each Servicer agrees to cooperate with
the Company and the Trustee and such Successor Master Servicer or Successor
Servicer, as the case may be, in effecting the termination of the
responsibilities and rights of the Master Servicer or such Servicer to conduct
its duties hereunder, including, without limitation, the transfer to Successor
Master Servicer or Successor Servicer, as the case may be, of all
<PAGE>
Amended and Restated Servicing Agreement 33
authority of the Master Servicer to coordinate the servicing of all Receivables
or all authority of such Servicer to service the Serviced Receivables, as the
case may be, provided for under the Pooling and Servicing Agreements (including
in the case of such Servicer, without limitation, all authority over all
Collections that shall on the date of transfer be held by such Servicer for
deposit, or that have been deposited by such Servicer, in the Collection
Account, or that shall thereafter be received with respect to the Serviced
Receivables), and in assisting the Successor Master Servicer or Successor
Servicer, as the case may be. Upon a Master Service Transfer, the terminated
Master Servicer shall promptly (x) assemble all of its documents, instruments
and other records (including credit files, licenses (to the extent
transferable), rights, copies of all relevant computer programs and any
necessary licenses (to the extent transferable) for the use thereof, related
material, computer tapes, disks, cassettes and data) that (i) evidence or record
Receivables sold and assigned to the Trust and (ii) are otherwise necessary to
enable a Successor Master Servicer to coordinate servicing of all such
Receivables and to prepare and deliver Daily Reports and Monthly Settlement
Statements, with or without the participation of the terminated Master Servicer
and (y) deliver or license (to the extent transferable) the use of all of the
foregoing documents, instruments and other records to such Successor Master
Servicer at a place designated by such Successor Master Servicer. Upon any
Service Transfer, the terminated Servicer shall promptly (x) assemble all of its
documents, instruments and other records (including credit files, licenses (to
the extent transferable), rights, copies of all relevant computer programs and
any necessary licenses (to the extent transferable) for the use thereof, related
material, computer tapes, disks, cassettes and data) that (i) evidence or will
evidence or record Receivables sold and assigned to the Trust and (ii) are
otherwise necessary to enable a Successor Servicer to effect the immediate
Collection of such Receivables, with or without the participation of the
applicable Seller or such Servicer and (y) deliver or
<PAGE>
Amended and Restated Servicing Agreement 34
license (to the extent transferable) the use of all of the foregoing documents,
instruments and other records to such Successor Servicer at a place designated
by such Successor Servicer. In recognition of any terminated Servicer's need to
have access to any such documents, instruments and other records that may be
transferred to a Successor Servicer hereunder, whether as a result of its
continuing responsibility as a servicer of accounts receivable that are not sold
and assigned to the Trust or otherwise, such Successor Servicer shall provide to
such terminated Servicer reasonable access to such documents, instruments and
other records transferred by such terminated Servicer to it in connection with
any activity arising in the ordinary course of such terminated Servicer's
business; provided that such terminated Servicer shall not disrupt or otherwise
interfere with the Successor Servicer's use of and access to such documents,
instruments and other records. To the extent that compliance with this Section
6.01 shall require the terminated Master Servicer or any terminated Servicer to
disclose to the Successor Master Servicer or Successor Servicer information of
any kind that the terminated Master Servicer or such terminated Servicer
reasonably deems to be confidential, the Successor Master Servicer or Successor
Servicer, as the case may be, shall be required to enter into such customary
licensing and confidentiality agreements as the terminated Master Servicer or
such terminated Servicer shall reasonably deem necessary to protect its
interests. All costs and expenses incurred by the terminated Master Servicer or
any terminated Servicer, the Successor Master Servicer or any Successor Servicer
and the Trustee in connection with any Master Service Transfer or Service
Transfer shall be for the account of the terminated Master Servicer or
terminated Servicer, as the case may be, and to the extent any costs or expenses
incurred by the Trustee are not so paid, the Trustee shall be entitled to be
paid such items from amounts that would otherwise be distributable to the
Company under Article III of the Pooling Agreement.
<PAGE>
Amended and Restated Servicing Agreement 35
SECTION 6.02. Trustee To Act; Appointment of Successor. (a) On and
after (i) the receipt by a Servicer of a Termination Notice pursuant to Section
6.01 or (ii) the date on which a Servicer notifies the Trustee, the Master
Servicer, the Company and each Rating Agency in writing of its resignation
pursuant to Section 5.03 (the "Resignation Notice"), such Servicer shall
continue to perform all servicing functions under the Pooling and Servicing
Agreements until the earlier of (i) the date on which a Successor Servicer
accepts its appointment and (ii) 60 days after the delivery of such Termination
Notice or Resignation Notice, as the case may be. Upon the receipt by the Master
Servicer of a Termination Notice or Resignation Notice with respect to any
Servicer, the Master Servicer shall, without any action on the part of the
Company, the Trustee or any other Person, be deemed appointed as successor
servicer (a "Successor Servicer") with respect to the Serviced Receivables. The
Master Servicer shall accept its appointment as Successor Servicer by a written
assumption in a form acceptable to the Trustee and the Company, unless the
Master Servicer is unable to act as Servicer for the Serviced Receivables for
the reasons set forth in Section 5.03. If the Master Servicer is unable to act
as Servicer for the Serviced Receivables, the Master Servicer shall promptly
deliver a Resignation Notice and Opinion of Counsel to the Company and the
Trustee in the same manner as if the Master Servicer were resigning as Servicer
under Section 5.03, but such Resignation Notice from the Master Servicer shall
not have the effect of postponing the beginning of the 60-day period referred to
in the first sentence of this subsection 6.01(a). The Trustee and the Company,
or the Company (with the consent of the Trustee) shall, as promptly as
reasonably possible after the receipt of a Resignation Notice from the Master
Servicer in accordance with the preceding sentence, appoint an Eligible
Successor Servicer and such Successor Servicer shall accept its appointment by a
written assumption in a form acceptable to the Trustee and the Company.
<PAGE>
Amended and Restated Servicing Agreement 36
(b) On and after (i) the receipt by the Master Servicer of a
Termination Notice pursuant to Section 6.01 or (ii) the date on which the Master
Servicer delivers a Resignation Notice to the Trustee, the Company and each
Rating Agency notifying them of its resignation pursuant to Section 5.03, the
Master Servicer shall continue to perform all of its functions under the Pooling
and Servicing Agreements until the earlier of (i) the date on which a Successor
Master Servicer accepts its appointment and (ii) 60 days after the delivery of
such Termination Notice or Resignation Notice, as the case may be. The Trustee
and the Company, or the Company (with the consent of the Trustee) shall, as
promptly as reasonably possible after the receipt of a Resignation Notice from
the Master Servicer, appoint an Eligible Successor Servicer as successor Master
Servicer (the "Successor Master Servicer")and such Successor Master Servicer
shall accept its appointment by a written assumption in a form acceptable to the
Trustee and the Company.
(c) In the event that a Successor Master Servicer or Successor
Servicer has not been appointed or has not accepted its appointment at the time
when the Master Servicer or a Servicer ceases to act as Master Servicer or
Servicer, as the case may be, the Trustee without further action shall be
appointed Successor Master Servicer or Successor Servicer, as the case may be;
provided, that the Trustee shall only be responsible for the duties and
liabilities of Successor Master Servicer or such Successor Servicer that are
consistent with an orderly collection and liquidation of the Receivables and
other Trust Assets in the manner contemplated for such liquidations in Section
7.02 of the Pooling Agreement. The Trustee shall not be liable for any action
taken or not taken in effecting such liquidations of Receivables so long as such
liquidations are conducted in a commercially reasonable manner and on
commercially reasonable terms. The Trustee may delegate any of its master
servicing or servicing obligations to an affiliate or agent in accordance with
subsection 2.02(d). Notwithstanding the above, the Trustee shall, if the Trustee
is legally
<PAGE>
Amended and Restated Servicing Agreement 37
unable so to act, petition a court of competent jurisdiction to appoint any
Person qualifying as an Eligible Successor Servicer as the Successor Master
Servicer or a Successor Servicer hereunder. The Master Servicer shall
immediately give notice to each Rating Agency of the appointment of any
Successor Master Servicer or Successor Servicer.
(d) Upon its appointment, the Successor Master Servicer or Successor
Servicer shall be the successor in all respects to the Master Servicer or the
Servicer to which it is successor with respect to master servicing or servicing
functions, as the case may be, under the Pooling and Servicing Agreements (with
such changes as are agreed to between such Successor Master Servicer or
Successor Servicer, as the case may be, and either the Company (with the consent
of the Rating Agencies) or the Company and the Trustee) and shall be subject to
all the responsibilities, duties and liabilities relating thereto placed on the
Master Servicer or such Servicer, as the case may be, by the terms and
provisions hereof, and all references in any Pooling and Servicing Agreement to
the Master Servicer or such Servicer, as the case may be, shall be deemed to
refer to such Successor Master Servicer or such Successor Servicer, as the case
may be. The Successor Master Servicer or such Successor Servicer shall not be
liable for, and the replaced Master Servicer or Servicer, as the case may be,
shall indemnify the Successor Master Servicer or such Successor Servicer, as the
case may be, against costs incurred by the Successor Master Servicer or
Successor Servicer as a result of, any acts or omissions of such replaced Master
Servicer or Servicer or any events or occurrences occurring prior to the
Successor Master Servicer's or Successor Servicer's acceptance of its
appointment as Successor Master Servicer or Successor Servicer. Any Successor
Servicer shall manage the servicing and administration of the Serviced
Receivables in accordance with the Policies of the replaced Servicer and the
terms of the Pooling and Servicing Agreements.
(e) If the Master Servicer becomes a Successor Servicer, the Master
Servicer shall receive the same
<PAGE>
Amended and Restated Servicing Agreement 38
servicing compensation in respect of the Serviced Receivables as the replaced
Servicer. If the Master Servicer is unable to act as Successor Servicer, the
Company and the Trustee shall review any bids obtained from Eligible Successor
Servicers and the Company and the Trustee, or the Company (with the consent of
the Trustee) may appoint any Eligible Successor Servicer submitting such a bid
as a Successor Servicer for servicing compensation not in excess of the portion
of the Servicing Fee previously payable to the replaced Servicer.
SECTION 6.03. Waiver of Past Defaults. Holders of Investor
Certificates evidencing more than 50% of the Aggregate Invested Amount may waive
any continuing default by the Master Servicer, any Servicer or the Company in
the performance of its respective obligations hereunder and its consequences,
except a default in the failure to make any required deposits or payments in
respect of any Series of Investor Certificates, which shall require a waiver by
the holders of all of the affected Investor Certificates. Upon any such waiver
of a past default, such default shall cease to exist, and any default arising
therefrom shall be deemed to have been remedied for every purpose of the Pooling
and Servicing Agreements. No such waiver shall extend to any subsequent or other
default or impair any right consequent thereon except to the extent expressly so
waived. Either the Company, the Master Servicer or such Servicer shall provide
notice to each Rating Agency of any such waiver.
SECTION 6.04. Other Servicer Terminations. The Company shall
terminate all of the rights and obligations of any Servicer of Receivables
originated by any Seller that is terminated pursuant to Section 9.13 of the
Receivables Sale Agreement, but only with respect to Receivables originated by
such terminated Seller after such termination. Any such Servicer shall remain
bound hereunder (unless terminated hereunder otherwise than pursuant to this
Section 6.04) to perform all of its obligations as a Servicer with respect to
all Receivables originated by such Seller and sold to the Company (and sold by
the Company to the Trust) before such
<PAGE>
Amended and Restated Servicing Agreement 39
termination of such Seller under the Receivables Sale Agreement.
ARTICLE VII
Miscellaneous Provisions
SECTION 7.01. Amendment. This Agreement may only be amended,
supplemented or otherwise modified from time to time if such amendment,
supplement or modification is effected in accordance with the provisions of
Section 10.01 of the Pooling Agreement.
SECTION 7.02. Termination. (a) The respective obligations and
responsibilities of the parties hereto shall terminate on the Trust Termination
Date (unless such obligations or responsibilities are expressly stated to
survive the termination of this Agreement).
(b) All authority and power granted to the Master Servicer and any
Servicer under any Pooling and Servicing Agreement shall automatically cease and
terminate on the Trust Termination Date, and shall pass to and be vested in the
Company and, without limitation, the Company is hereby authorized and empowered
to execute and deliver, on behalf of the Master Servicer or any Servicer, as
attorney-in-fact or otherwise, all documents and other instruments, and to do
and accomplish all other acts or things necessary or appropriate to effect the
purposes of such transfer of rights from and after the Trust Termination Date.
The Master Servicer and each Servicer shall cooperate with the Company in
effecting the termination of its responsibilities and rights to conduct master
servicing or servicing, as the case may be, of the Receivables. The Master
Servicer and each Servicer shall transfer all of its records relating to the
Receivables to the Company in such form as the Company may reasonably request
and shall transfer all other records, correspondence and documents to the
Company in the manner and at such times as the Company shall reasonably request.
<PAGE>
Amended and Restated Servicing Agreement 40
To the extent that compliance with this subsection 7.02(b) shall require the
Master Servicer or any Servicer to disclose to the Company information of any
kind that the Master Servicer or such Servicer deems to be confidential, the
Company shall be required to enter into such customary licensing and
confidentiality agreements as the Master Servicer or such Servicer, as the case
may be, shall reasonably deem necessary to protect its interests.
SECTION 7.03. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO ANY CONFLICTS OF LAWS PRINCIPLES.
SECTION 7.04. Addition of Servicers. Subject to the terms and
conditions hereof, from time to time one or more wholly owned, direct or
indirect, Subsidiaries of Furnishings International Inc. that have been approved
as additional Sellers pursuant to the Pooling Agreement and any Supplement shall
become additional Servicers parties hereto upon (a) execution by each such
Subsidiary of an Additional Seller/Servicer Supplement and (b) satisfaction of
all conditions precedent set forth in Section 3.05 of the Receivables Sale
Agreement to such Subsidiary becoming an additional Seller.
SECTION 7.05. Notices. All notices, requests and demands to or upon
the respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or three days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed as set forth in Section 10.05 of the Pooling Agreement or
Section 9.09 of the Receivables Sale Agreement, or to such other address as may
be hereafter notified by the respective parties hereto.
SECTION 7.06. Counterparts. This Agreement may be executed in two or
more counterparts (and by different
<PAGE>
Amended and Restated Servicing Agreement 41
parties on separate counterparts), each of which shall be an original, but all
of which together shall constitute one and the same instrument. Delivery of an
executed counterpart of a signature page to this Agreement by facsimile
transmission shall be effective as delivery of a manually executed counterpart
of this Agreement.
SECTION 7.07. Third-Party Beneficiaries. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and the
Certificateholders and their respective successors and permitted assigns. Except
as provided in this Article VII, no other person shall have any right or
obligation hereunder.
SECTION 7.08. Merger and Integration. Except as specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived, or supplemented except as provided herein.
SECTION 7.09. Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
SECTION 7.10. No Set-Off. Except as expressly provided in this
Agreement, each of the Master Servicer and each Servicer agrees that it shall
have no right of set-off or banker's lien against, and no right to otherwise
deduct from, any funds held in the Collection Account for any amount owed to it
by the Company, the Trust, the Trustee or any Certificateholder.
SECTION 7.11. No Bankruptcy Petition. Each of the Master Servicer
and each Servicer hereby covenants and agrees that, prior to the date which is
one year and one day after the Trust Termination Date, it shall not institute
against, or join any other Person in instituting against,
<PAGE>
Amended and Restated Servicing Agreement 42
the Company any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any Federal or state
bankruptcy or similar law.
<PAGE>
Amended and Restated Servicing Agreement 43
IN WITNESS WHEREOF, the Company, the Master Servicer, each Servicer
and the Trustee have caused this Agreement to be duly executed by their
respective officers as of the day and year first above written.
LFI RECEIVABLES CORPORATION,
by___________________________________
Name:
Title:
LFI SERVICING CORPORATION,
Master Servicer,
by___________________________________
Name:
Title:
AMETEX FABRICS, INC.,
Servicer,
by___________________________________
Name:
Title:
THE BERKLINE CORPORATION,
Servicer,
by___________________________________
Name:
Title:
<PAGE>
Amended and Restated Servicing Agreement 44
DREXEL HERITAGE
FURNISHINGS INC.,
Servicer,
by___________________________________
Name:
Title:
FURNISHINGS
INTERNATIONAL INC.,
Servicer,
by___________________________________
Name:
Title:
HENREDON FURNITURE
INDUSTRIES, INC.,
Servicer,
by___________________________________
Name:
Title:
LA BARGE, INC.,
Servicer,
by___________________________________
Name:
Title:
<PAGE>
Amended and Restated Servicing Agreement 45
LEXINGTON FURNITURE
INDUSTRIES, INC.,
Servicer,
by___________________________________
Name:
Title:
MAITLAND-SMITH, INC.,
Servicer,
by___________________________________
Name:
Title:
ROBERT ALLEN FABRICS, INC.,
Servicer,
by___________________________________
Name:
Title:
UNIVERSAL FURNITURE
INDUSTRIES, INC.,
Servicer,
by___________________________________
Name:
Title:
<PAGE>
Amended and Restated Servicing Agreement 46
THE CHASE MANHATTAN BANK, not
in its individual capacity but
solely as Trustee,
by___________________________________
Name:
Title:
<PAGE>
Exhibit 10.11
================================================================================
AMENDED AND RESTATED
RECEIVABLES SALE AGREEMENT
Among
LFI RECEIVABLES CORPORATION,
THE SELLERS NAMED HEREIN
and
THE SERVICERS NAMED HEREIN
Dated as of February 4, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
SECTION 1.01. Defined Terms.............................................. 2
SECTION 1.02. Other Definitional Provisions.............................. 11
ARTICLE II
Purchase and Sale of Receivables
SECTION 2.01. Purchase and Sale of Receivables........................... 12
SECTION 2.02. Purchase Price............................................. 15
SECTION 2.03. Payment of Purchase Price.................................. 16
SECTION 2.04. No Repurchase.............................................. 17
SECTION 2.05. Rebates, Adjustments, Returns,
Reductions and Modifications............................. 18
SECTION 2.06. Payments in Respect of Ineligible
Receivables and Seller Indemnification Payments.......... 18
SECTION 2.07. Certain Charges............................................ 20
SECTION 2.08. Certain Allocations........................................ 21
ARTICLE III
Conditions to Purchase and Sale
SECTION 3.01. Conditions Precedent to the Company's Purchase of
Receivables on the Effective Date........................ 21
SECTION 3.02. Conditions Precedent to All the Company's Purchases of
Receivables.............................................. 23
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Page
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SECTION 3.03. Conditions Precedent to Sellers' Obligations on
the Effective Date....................................... 24
SECTION 3.04. Conditions Precedent to All the Sellers' Obligations....... 24
SECTION 3.05. Conditions Precedent to the Addition of a Seller........... 25
ARTICLE IV
Representations and Warranties
SECTION 4.01. Representations and Warranties of the Sellers
Relating to the Sellers.................................. 27
SECTION 4.02. Representations and Warranties of the Sellers
Relating to the Receivables.............................. 33
SECTION 4.03. Representations and Warranties of the Company............. 35
ARTICLE V
Affirmative Covenants
SECTION 5.01. Certificates; Other Information............................ 36
SECTION 5.02. Compliance with Law and Policies........................... 37
SECTION 5.03. Preservation of Corporate
Existence................................................ 37
SECTION 5.04. Separate Corporate Existence............................... 37
SECTION 5.05. Inspection of Property; Books and
Records; Discussions..................................... 39
SECTION 5.06. Location of Records........................................ 39
SECTION 5.07. Computer Files............................................. 40
SECTION 5.08. Payment of and Compliance with Obligations................. 40
<PAGE>
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Page
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SECTION 5.09. Collections................................................ 40
SECTION 5.10. Furnishing Copies, Etc..................................... 41
SECTION 5.11. Obligations with Respect to Obligors and Receivables....... 42
SECTION 5.12. Responsibilities of the Sellers............................ 42
SECTION 5.13. Assessments................................................ 42
SECTION 5.14. Further Action............................................. 42
SECTION 5.15. Sale of Receivables........................................ 43
SECTION 5.16. Baybank Depository Agreement............................... 44
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Page
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ARTICLE VI
Negative Covenants
SECTION 6.01. Limitations on Transfers of Receivables, Etc............... 44
SECTION 6.02. Extension or Amendment of Receivables...................... 44
SECTION 6.03. Change in Payment Instructions to Obligors................. 44
SECTION 6.04. Change in Name............................................. 45
SECTION 6.05. Policies................................................... 45
SECTION 6.06. Modification of Ledger..................................... 46
SECTION 6.07. Accounting for Purchases................................... 46
SECTION 6.08. Instruments................................................ 46
SECTION 6.09. Ineligible Receivables..................................... 46
SECTION 6.10. Business of the Seller..................................... 46
SECTION 6.11. Limitation on Fundamental Changes.......................... 47
ARTICLE VII
Purchase Termination Events
SECTION 7.01. Purchase Termination Events................................ 47
SECTION 7.02. Remedies................................................... 51
ARTICLE VIII
Seller Note
SECTION 8.01. Seller Note................................................ 53
SECTION 8.02. Restrictions on Transfer of Seller Note.................... 54
SECTION 8.03. Discretion; Aggregate Amount............................... 55
<PAGE>
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Page
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ARTICLE IX
Miscellaneous
SECTION 9.01. Payments................................................... 55
SECTION 9.02. Costs and Expenses......................................... 56
SECTION 9.03. Successors and Assigns..................................... 57
SECTION 9.04. Governing Law.............................................. 58
SECTION 9.05. No Waiver; Cumulative Remedies............................. 58
SECTION 9.06. Amendments and Waivers..................................... 58
SECTION 9.07. Severability............................................... 59
SECTION 9.08. Notices.................................................... 59
SECTION 9.09. Counterparts............................................... 60
SECTION 9.10. Waivers of Jury Trial...................................... 60
SECTION 9.11. Jurisdiction; Consent to Service of Process................ 60
SECTION 9.12. Addition of Sellers........................................ 61
SECTION 9.13. Termination of Seller...................................... 61
SECTION 9.14. No Bankruptcy Petition..................................... 63
SECTION 9.15. Termination................................................ 63
SECTION 9.16. Construction of Agreement.................................. 64
EXHIBITS
Exhibit A Form of Seller Note
Exhibit B Form of Additional Seller/
Servicer Supplement
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
<PAGE>
AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT
dated as of February 4, 1997 (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, the parties hereto entered into that certain Receivables
Sale Agreement, dated as of August 5, 1996 (the "Original Agreement") in order
for the Sellers to sell to the Company, and the Company to purchase from the
Sellers, all the Sellers' right, title and interest in, to and under the
Receivables then existing and thereafter created and all other Receivable
Assets;
WHEREAS, the parties hereto wish to amend and restate the Original
Agreement so as to amend various provisions of the Original Agreement;
WHEREAS, the Original Agreement shall be replaced in whole by this
Agreement; and
WHEREAS, the Master Servicer, the Company and The Chase Manhattan
Bank, as Trustee, have entered into a Pooling Agreement dated as of August 5,
1996 (such agreement, as amended and restated on the date hereof and as it may
be amended, modified or otherwise supplemented from time to time hereafter,
being the "Pooling Agreement") in order to create a master trust into which the
Company has transferred, and will continue to transfer, all its right, title and
interest in, to and under the Receivables and certain other assets then or
hereafter owned by the Company.
<PAGE>
2
Amended and Restated Receivables Sale Agreement
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. Capitalized terms defined or referenced
in the Pooling Agreement shall be used herein as therein defined (unless
otherwise defined or referenced herein), and the following terms shall have the
following meanings:
"ABR" shall mean, for any day, a per annum alternate base rate
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of
(a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such
day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus
1/2 of 1%. If for any reason The Chase Manhattan Bank shall have determined
(which determination shall be conclusive absent manifest error) that it is
unable to ascertain the Base CD Rate or the Federal Funds Effective Rate or both
for any reason, including the inability or failure of The Chase Manhattan Bank
to obtain sufficient quotations in accordance with the terms of the definition
thereof, the Alternate Base Rate shall be determined without regard to clause
(b) or (c), or both, of the immediately preceding sentence, as appropriate,
until the circumstances giving rise to such inability no longer exist. Any
change in the Alternate Base Rate due to a change in the Prime Rate, the Base CD
Rate or the Federal Funds Effective Rate shall be effective on the effective
date of such change in the Prime Rate, the Base CD Rate or the Federal Funds
Effective Rate, respectively. The term "Prime Rate" shall mean the rate of
interest per annum publicly announced from time to time by The Chase Manhattan
Bank as its prime rate in effect at its principal office in New York City; each
change in the Prime Rate shall be
<PAGE>
3
Amended and Restated Receivables Sale Agreement
effective on the date such change is publicly announced as being effective. The
term "Base CD Rate" shall mean the sum of (a) the product of (i) the Three-Month
Secondary CD Rate and (ii) Statutory Reserves and (b) the Assessment Rate. The
term "Three-Month Secondary CD Rate" shall mean, for any day, the secondary
market rate for three-month certificates of deposit reported as being in effect
on such day (or, if such day shall not be a Business Day, the next preceding
Business Day) by the Board through the public information telephone line of the
Federal Reserve Bank of New York (which rate will, under the current practices
of the Board, be published in Federal Reserve Statistical Release H.15(519)
during the week following such day), or, if such rate shall not be so reported
on such day or such next preceding Business Day, the average of the secondary
market quotations for three-month certificates of deposit of major money center
banks in New York City received at approximately 10:00 a.m., New York City time,
on such day (or, if such day shall not be a Business Day, on the next preceding
Business Day) by The Chase Manhattan Bank from three New York City negotiable
certificate of deposit dealers of recognized standing selected by it. The term
"Federal Funds Effective Rate" shall mean, for any day, the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for the day for such transactions received by The Chase Manhattan
Bank from three Federal funds brokers of recognized standing selected by it.
"Adjustment Amount" shall have the meaning specified in subsection
2.06(a).
"Applicable Insolvency Laws" shall have the meaning specified in
subsection 7.01(d).
<PAGE>
4
Amended and Restated Receivables Sale Agreement
"Assessment Rate" shall mean, for any date, the annual rate (rounded
upwards, if necessary, to the next 1/100 of 1%) most recently estimated by The
Chase Manhattan Bank as the then current net annual assessment rate that will be
employed in determining amounts payable by The Chase Manhattan Bank to the
Federal Deposit Insurance Corporation (or any successor) for insurance by such
Corporation (or such successor) of time deposits made in U.S. Dollars at The
Chase Manhattan Bank's domestic offices.
"Collections" shall mean all collections and all amounts received in
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).
"Credit Agreement" shall mean the Credit Agreement dated as of
August 5, 1996, among: Lifestyle Furnishings International Ltd.; each subsidiary
of Lifestyle Furnishings International Ltd. listed on Schedule 1 thereto;
Furnishings International Inc.; the lenders identified therein; The Chase
Manhattan Bank, as a lender and as administrative agent and collateral agent for
the lenders; and Chase Manhattan Bank Delaware, as a letter of credit issuer
thereunder (including any amendments or modifications thereto or refinancing
thereof).
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Amended and Restated Receivables Sale Agreement
"Cut-Off Date" shall mean the close of business on January 29, 1997.
"Discounted Percentage" shall have the meaning specified in Schedule
6.
"Documents" shall have the meaning specified in subsection
7.02(b)(iii).
"Early Termination" shall have the meaning specified in Article VII.
"Effective Date" shall mean February 4, 1997.
"Eligible Letter of Credit" shall mean any irrevocable documentary
credit (a direct-pay letter of credit) or any irrevocable standby letter of
credit supporting a Receivable, or two or more Receivables sold to the Company
by the same Seller, that is (a) either (i) issued in favor of such Seller or the
Company and the right to draw under which is, or the proceeds of which are,
legally transferable and assignable to the Trustee or (ii) issued in favor of
the Trustee, (b) governed by the UCC of a state of the United States of America,
governed by the UCP 500 or governed as to certain terms by the UCP 500 and as to
any remaining terms by the UCC of a state of the United States of America, (c)
issued by a commercial bank that (i) has a combined capital and surplus of at
least $50,000,000 and (ii) has (or the holding company parent of which has)
either a long-term or a short-term senior unsecured debt rating in the highest
rating category by each Rating Agency and (d) permits the beneficiary to draw,
upon notice to the issuing bank, an amount equal to the entire Principal Amount
of any Receivable supported thereby in U.S. Dollars payable by the issuing bank
to the Trustee, as assignee or as original beneficiary, in the case of a
documentary credit (a direct-pay letter of credit), on or before the due date of
such Receivable and, in the case of a standby letter of credit, on or before the
fifth day following the due date of such Receivable.
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Amended and Restated Receivables Sale Agreement
"ERISA Affiliate" shall mean with respect to any Person, any trade
or 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
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,
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 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;
(d) it is a Receivable originated by the Beacon Hill division of
Robert Allen Fabrics, Inc.; or
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Amended and Restated Receivables Sale Agreement
(e) it is owing by Montgomery Ward Holding Corporation or any of its
subsidiaries to The Berkline Corporation.
"Indemnification Event" shall have the meaning specified in
subsection 2.06(b).
"Ineligibility Event" shall have the meaning specified in subsection
2.06(a).
"Ineligible Receivable" shall have the meaning specified in
subsection 2.06(a).
"Insolvency Event", with respect to a Seller, shall mean the
occurrence of any one or more of the Purchase Termination Events specified in
subsection 7.01(d).
"Multiemployer Plan" shall mean with respect to any Person, a
multiemployer 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 Accrual Period, the rate per annum, as determined by The Chase Manhattan
Bank, 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 Chase Manhattan Bank for purposes of providing interest rates
applicable to U.S. Dollar deposits having a maturity of one
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8
Amended and Restated Receivables Sale Agreement
month in the London interbank market) at approximately 11:00 a.m., London time,
two Business Days prior to the commencement of such 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 Chase Manhattan Bank in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Accrual Period.
"Payment Date" shall have the meaning specified in subsection
2.03(a).
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established 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 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
hereto.
"Potential Purchase Termination Event" shall mean any condition or
act 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.
"Purchase Termination Event" shall have the meaning specified in
Section 7.01.
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Amended and Restated Receivables Sale Agreement
"Purchased Receivable" shall mean, at any time, any Receivable sold
to the Company by any Seller pursuant to, and in accordance with the terms of,
this Agreement.
"Receivable Assets" shall have the meaning specified in subsection
2.01(a).
"Receivable" shall mean the indebtedness and payment obligations of
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
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.
"Sale Termination Date" shall have the meaning specified in
subsection 9.13(b).
"Sellers" shall have the meaning specified in the recitals hereto.
"Seller Addition Date" shall have the meaning specified in Section
3.05.
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Amended and Restated Receivables Sale Agreement
"Seller Adjustment Payment" shall have the meaning specified in
subsection 2.06(a).
"Seller Dilution Adjustment Payment" shall have the meaning
specified in Section 2.05.
"Seller Indemnification Payment" shall have the meaning specified in
subsection 2.06(b).
"Seller Note" shall have the meaning specified in Section 8.01.
"Statutory Reserves" shall mean a fraction (expressed as a decimal),
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board and any other banking authority, domestic or foreign,
to which [The Chase Manhattan Bank]is subject for new negotiable nonpersonal
time deposits in dollars of over $100,000 with maturities approximately equal to
three months. Statutory Reserves shall be adjusted automatically on and as of
the effective date of any change in any reserve percentage.
"Subordinated Notes" shall mean the 107/8% Senior Subordinated Notes
due 2006 issued by Lifestyle Furnishings International Ltd. on August 5, 1996 in
an aggregate principal amount of not less than $200,000,000 and shall include
any substantially identical notes issued in exchange therefore after August 5,
1996, pursuant to the indenture governing such Notes.
"Transactions" shall have the meaning specified in subsection
4.01(b).
"Withdrawal Liability" shall mean liability to a Multiemployer Plan
as a result of a complete or partial
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11
Amended and Restated Receivables Sale Agreement
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 "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.
(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
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Amended and Restated Receivables Sale Agreement
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
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 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;
(iv) all rights (including rescission, replevin or reclamation)
relating to any Receivable originated by such Seller or arising therefrom;
(v) all proceeds of or payments in respect of any and all of the
foregoing clauses (i) through (iv) (including Collections).
Such property described in the foregoing clauses (i) through (v) shall be
referred to herein as the "Receivable Assets".
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Amended and Restated Receivables Sale Agreement
(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, all Related Property,
Collections, all rights (including rescission, replevin or reclamation) in
respect of such Receivables originated by such Seller and all proceeds or
payments in respect of any of the foregoing and (ii) in the case of each such
date of creation, all such newly created Receivables originated by such Seller,
all Related Property, Collections, all rights (including rescission, replevin or
reclamation) in respect of such Receivables and all proceeds or payments in
respect of any of the foregoing 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 other related Receivable Assets 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 other related Receivable Assets shall be deemed
to not have been so sold, transferred, assigned, set over or conveyed to the
Company.
(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 other Receivable Assets 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
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Amended and Restated Receivables Sale Agreement
provided herein. The foregoing sale, assignment, transfer and conveyance does
not constitute and is not intended to result in the creation or assumption by
the Company of any obligation of the Sellers or any other Person in connection
with the Receivables, the other Receivable Assets 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, all rights (including rescission, replevin or
reclamation) in respect of the Receivables and all proceeds or payments in
respect of any of the foregoing 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, all rights
(including rescission, replevin or reclamation) relating to any Receivable
originated by such Seller or arising therefrom and all proceeds or payments in
respect of any of the foregoing 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 from such Seller and (ii) with respect to any other Receivable
Assets 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
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Amended and Restated Receivables Sale Agreement
perfection of the conveyance of such Receivables and any other Receivable Assets
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 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 other Receivable Assets (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.
SECTION 2.02. Purchase Price. The aggregate purchase price payable
by the Company to the Sellers (the "Purchase Price") for Receivables and other
Receivable Assets on any Payment Date under this Agreement shall be equal to the
product of (a) the aggregate outstanding
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Amended and Restated Receivables Sale Agreement
Principal Amount of 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
or provide for the Purchase Price for Receivables and other Receivable Assets
(net of the deductions referred to in Section 2.03(d)) 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(d)) 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 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
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Amended and Restated Receivables Sale Agreement
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.
(c) Any increase in the principal amount of the Seller Note, in
payment of any Purchase Price pursuant to Section 2.03(b), shall be applied to
the Purchase Price in an amount equal to such increase.
(d) The Company shall deduct from the Purchase Price otherwise
payable 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.
(e) 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.
(f) 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, payable on demand.
SECTION 2.04. No Repurchase. No Seller shall have any right or
obligation under this Agreement, by implication or otherwise, to repurchase from
the Company any Purchased Receivables originated by such Seller or other
Receivable Assets or to rescind or otherwise retroactively effect any purchase
of any such Purchased Receivables or
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Amended and Restated Receivables Sale Agreement
other Receivable Assets after the Payment Date relating thereto; provided that
the foregoing shall not be interpreted to limit the right of the Company herein
to receive a Seller Adjustment Payment or Seller Indemnification Payment.
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 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 Ineligible Receivables and
Seller Indemnification Payments. (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 subsection 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
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Amended and Restated Receivables Sale Agreement
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 with respect to
such Seller 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,
such Seller shall make such payment immediately. Any payment by such Seller
pursuant to this subsection 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 9.02 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
<PAGE>
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Amended and Restated Receivables Sale Agreement
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 with
respect to such Seller has occurred and is continuing or (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 subsection
2.06(b) is referred to as a "Seller Indemnification Payment". Upon a Seller
Indemnification Payment, the Company shall automatically agree to pay to the
appropriate Seller all Collections with respect to the Receivable in respect of
which a Seller Indemnification Payment is made.
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.
<PAGE>
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Amended and Restated Receivables Sale Agreement
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.
ARTICLE III
Conditions to Purchase and Sale
SECTION 3.01. Conditions Precedent to the Company's Purchase of
Receivables on the Effective Date. The obligation of the Company to purchase the
Receivables and the other Receivable Assets 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
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Amended and Restated Receivables Sale Agreement
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 before such
Effective Date, at its own expense, UCC-1 financing statements with
respect to the Receivables originated by such Seller and other Receivable
Assets 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 the UCC (to the extent applicable) the
Company's ownership of the Receivables originated by such Seller and other
Receivable Assets 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 other Receivable Assets reflecting the absence of Liens
thereon, except for Liens created in connection with the sale by the
Sellers to the Company, and by the Company to the Trust, of such
Receivables and other Receivable Assets.
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Amended and Restated Receivables Sale Agreement
(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.
SECTION 3.02. Conditions Precedent to All the Company's Purchases of
Receivables. The obligation of the Company to purchase any Receivable and the
other related Receivable Assets 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
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Amended and Restated Receivables Sale Agreement
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
foregoing conditions shall not prevent such Seller from subsequently selling
Receivables originated by it upon satisfaction of all such conditions.
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
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Amended and Restated Receivables Sale Agreement
such date shall constitute a representation and warranty by the Company on such
Payment Date that the statement in clause (ii) below is true): after giving
effect to such purchase, (i) no Purchase Termination Event set forth in
paragraph (d) of Section 7.01 hereof, and (ii) 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.
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 9.12 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 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;
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Amended and Restated Receivables Sale Agreement
(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;
(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 other Receivable Assets
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 other
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Amended and Restated Receivables Sale Agreement
Receivable Assets reflecting the absence of Liens thereon, except for (i)
Liens created in connection with the sale by such Seller to the Company,
and by the Company to the Trust, of such Receivables and other Receivable
Assets 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
(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
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Amended and Restated Receivables Sale Agreement
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 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
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Amended and Restated Receivables Sale Agreement
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 Nonassignment
Act (Public Contracts), 41 U.S.C. ss. 15, or Assignment of Claims Act, 31 U.S.C.
ss. 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.
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Amended and Restated Receivables Sale Agreement
(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.
(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 and has paid or caused
to be paid all taxes due and payable 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
<PAGE>
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Amended and Restated Receivables Sale Agreement
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
transactions 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 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 a Party is 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
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Amended and Restated Receivables Sale Agreement
the State of New York has not changed in the past four months.
(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.
(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
<PAGE>
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Amended and Restated Receivables Sale Agreement
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 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
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Amended and Restated Receivables Sale Agreement
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 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 Effective Date or, in
the case of Receivables sold to the Company after the Effective 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 Effective Date, each Receivable that
is represented to be an Eligible Receivable sold to the Company on such
date is an Eligible Receivable on the Effective Date and, in the case of
Receivables sold to the Company after the Effective 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
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Amended and Restated Receivables Sale Agreement
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 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 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 pre-payment, 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).
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Amended and Restated Receivables Sale Agreement
(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.
(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
outstanding 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
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Amended and Restated Receivables Sale Agreement
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.
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 other
Receivable Assets.
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
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Amended and Restated Receivables Sale Agreement
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 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
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Amended and Restated Receivables Sale Agreement
(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 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
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Amended and Restated Receivables Sale Agreement
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,
discharge 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 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 other
Receivable Assets, 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,
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Amended and Restated Receivables Sale Agreement
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 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
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Amended and Restated Receivables Sale Agreement
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
anything 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 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
reasonable judgment or that the Company may reasonably request, in order
to more fully effect the purposes of
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Amended and Restated Receivables Sale Agreement
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. Without 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.
(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 other Receivable Assets 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
therewith shall be payable by such Seller as provided in Section 9.02. 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.
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Amended and Restated Receivables Sale 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.
ARTICLE VI
Negative Covenants
Each Seller hereby agrees that, so long as there are any amounts
outstanding 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 or other
Receivable Assets 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. Instruct
any Obligor of any Purchased Receivables
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Amended and Restated Receivables Sale Agreement
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 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
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Amended and Restated Receivables Sale Agreement
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).
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
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Amended and Restated Receivables Sale Agreement
such Seller and business activities reasonably 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.
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; provided,
however that Furnishings International Inc. may transfer the property, business
and assets of its Lineage Home Furnishings and Contract Furnishings divisions to
any, direct or indirect, wholly owned subsidiary of Lifestyle Holdings Ltd.
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
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Amended and Restated Receivables Sale Agreement
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 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
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Amended and Restated Receivables Sale Agreement
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
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
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Amended and Restated Receivables Sale Agreement
(g) a notice of Lien shall have been filed by the PBGC against a
Seller 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 unless there
shall have been delivered to the Trustee and the Rating Agencies proof of
release of such Lien; or
(h) any Lien in an amount equal to or greater than $1,000,000 has
been asserted against or imposed on, any real or personal property of a
Seller pursuant to the Comprehensive Environmental Response, Compensation,
and Liability Act, 42 U.S.C. ss. 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, in an amount equal to or greater
than $1,000,000, shall have been filed against a Seller unless there shall
have been delivered to the Trustee and the Rating Agencies proof of
release of such Lien.
then, (i) in the case of any Purchase Termination Event described in paragraph
(e)(i) above, the obligation of the Company to purchase Receivables from all
Sellers shall thereupon automatically terminate without further notice of any
kind, which is hereby waived by the Sellers, (ii) in the case of any Purchase
Termination Event described in paragraph (d), (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, (iii) 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
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Amended and Restated Receivables Sale Agreement
by such Seller unless both the Company and such Seller agree in writing that
such event shall not trigger an Early Termination hereunder and (iv) 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 (i), (ii), (iii) or (iv) 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 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 other Receivable Assets 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
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Amended and Restated Receivables Sale Agreement
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 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
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Amended and Restated Receivables Sale Agreement
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 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 Seller Note will have an initial principal amount equal to the
amount outstanding under that certain seller note issued pursuant to the
Receivables Sale Agreement, dated as of August 5, 1996, among the parties
hereto. The Company has incurred Indebtedness evidenced by the Seller Note and
may continue to 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
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Amended and Restated Receivables Sale Agreement
deductions as provided in Section 2.03(d)) for Receivables and other Receivable
Assets 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) and 2.03(b)(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 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, trans-
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Amended and Restated Receivables Sale Agreement
ferred, 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 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 other Receivable Assets 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)
and 2.03(b)(iii).
ARTICLE IX
Miscellaneous
SECTION 9.01. 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
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Amended and Restated Receivables Sale Agreement
specified by either party in a notice to the other party hereto.
SECTION 9.02. 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 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
<PAGE>
57
Amended and Restated Receivables Sale Agreement
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
9.02 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 9.02 shall survive the collection of all
Receivables, the termination of this Agreement and the payment of all amounts
payable hereunder.
SECTION 9.03. 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
<PAGE>
58
Amended and Restated Receivables Sale Agreement
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 9.04. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO ANY CONFLICT OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT ISSUES OF
PERFECTION ARE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION.
SECTION 9.05. 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.
SECTION 9.06. 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
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Amended and Restated Receivables Sale Agreement
modification shall not be effective until the Rating Agency Condition has been
satisfied.
SECTION 9.07. 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
unenforceable such provision in any other jurisdiction.
SECTION 9.08. 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 pre-paid, 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: Ronald Hoffman and
Richard Kennett
Telecopy: (910) 476-4551
The Sellers:
to the addresses set
forth in Schedule 4
in each case, with a copy to
Trustee: The Chase Manhattan Bank, as Trustee
<PAGE>
60
Amended and Restated Receivables Sale Agreement
450 W. 33rd Street, 15th Floor
New York, New York 10011
Attention: Advanced Structured
Products Group
Telecopier: (212) 946-3240
SECTION 9.09. Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts
(including by tele- copy), 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 9.10. 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.
SECTION 9.11. 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 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
<PAGE>
61
Amended and Restated Receivables Sale Agreement
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 9.08. 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 9.12. Addition of Sellers. Subject to Section 3.05, Section
2.08(m) of the Pooling Agreement, any applicable provisions in any Supplement,
and the terms and conditions of this Section 9.12, 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 related Seller Addition Date upon satisfaction of the
conditions set forth in Section 3.05.
SECTION 9.13. 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
<PAGE>
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Amended and Restated Receivables Sale Agreement
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 9.13 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 other Receivable Assets 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
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
<PAGE>
63
Amended and Restated Receivables Sale Agreement
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 other Receivable Assets 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, Seller Adjustment Payments and Seller
Indemnification Payments) to the extent such obligations arise hereunder.
SECTION 9.14. 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 9.15, 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 Applicable
Insolvency Laws.
SECTION 9.15. Termination. This Agreement will terminate at such
time as (a) the commitment of the Company
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64
Amended and Restated Receivables Sale Agreement
to purchase Receivables from all the Sellers hereunder shall have terminated and
(b) all Receivables purchased hereunder 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 9.16. 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 other
Receivable Assets 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.
<PAGE>
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Amended and Restated Receivables Sale Agreement
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:
<PAGE>
66
Amended and Restated Receivables Sale Agreement
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:
<PAGE>
67
Amended and Restated Receivables Sale Agreement
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:
<PAGE>
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Amended and Restated Receivables Sale Agreement
UNIVERSAL FURNITURE
INDUSTRIES, INC.,
Seller and Servicer,
by_____________________________________
Name:
Title:
LFI RECEIVABLES CORPORATION,
by_____________________________________
Name:
Title:
<PAGE>
Exhibit A to the
Amended and Restated Receivables Sale Agreement
[FORM OF
SELLER NOTE]
New York, New York
February 4, 1997
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 Amended and Restated Receivables Sale Agreement
dated as of February 4, 1997, 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 Amended and Restated Pooling Agreement, dated as of February 4, 1997,
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
<PAGE>
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 Holders (as defined in the
<PAGE>
3
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 be paid or delivered by the
Person making such
<PAGE>
4
payment or delivery (whether a trustee in bankruptcy, a receiver,
custodian, liquidating trustee or otherwise) directly to the Trustee
on behalf of the Holders 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 Holders and shall be received and held by such Seller in
trust for the Trustee on behalf of the Holders and shall be turned over by
such Seller to the Trustee for the benefit of the Holders 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 Holders (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
Holder 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.
<PAGE>
5
(d) Sellers' Rights of Subrogation. Each Seller agrees that no
payment or distribution to Holders 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 Holders, 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 Holders) 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
<PAGE>
6
Senior Obligations is rescinded or must be restored or returned by a
Holder or the Trustee on behalf of the Holders, 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 Holders or the
Trustee. As between the Sellers, on the one hand, and the Holders and the
Trustee, on the other hand, each of the Holders 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 Holders 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.
4. Restrictions on Assignment. Neither this Seller Note, nor any
right of the Sellers to receive payments hereunder, shall be assigned,
transferred,
<PAGE>
7
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 9.15 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 Holders) 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 Holders) may deem necessary for the
exercise or enforcement of any of the rights or interests of Holders;
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
(c) each Seller shall promptly take such action as the Trustee (on
behalf of the Holders) 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
<PAGE>
8
Holders) 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 Holders).
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:
<PAGE>
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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<PAGE>
Exhibit B to the
Amended and Restated Receivables Sale Agreement
[FORM OF ADDITIONAL SELLER/SERVICER SUPPLEMENT]
SUPPLEMENT, dated [ ], to (i) the Amended and Restated Receivables
Sale Agreement, dated as of February 4, 1997 (as amended, supplemented or
otherwise modified from time to time in accordance with its terms, the
"Receivables Sale Agreement"), among LFI Receivables Corporation, the Sellers
named therein and the Servicers named therein and (ii) the Amended and Restated
Servicing Agreement, dated as of February 4, 1997 (as amended, supplemental or
otherwise modified from time to time in accordance with its terms, 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 9.12 of the Receivables Sale Agreement,
Section 2.08(m) of the Pooling Agreement and any applicable provisions of any
Supplement;
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
<PAGE>
2
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 but now desires to become a Seller and a Servicer,
respectively, thereunder.
<PAGE>
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 Holders, 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:
<PAGE>
4
Acknowledged as of the date
first above written:
THE CHASE MANHATTAN BANK, as Trustee, on
behalf of the Holders,
by ________________________________
Title:
<PAGE>
Schedule 1 to the
Amended and Restated 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.
La Barge, 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 the Lineage Home Furnishings
division of FII.
<PAGE>
Schedule 2 to the
Amended and Restated Receivables Sale Agreement
Receivables
Delivered or transmitted via computer tape, diskette or data transmission
pursuant to Section 3.01(iv).
<PAGE>
Schedule 4 to the
Amended and Restated 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 Inc. Street
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, Inc. 28655
La Barge, 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, Inc. 27292
- ----------
(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.
<PAGE>
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, Inc. High Point, NC
27263
<PAGE>
Schedule 5 to the
Amended and Restated 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, Henredon
Inc. 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, Henry Link
Inc.
Maitland-Smith, Inc. None
Robert Allen Fabrics, Inc. American Textiles
Robert Allen Fabrics, Inc.
Contract Division
Robert Allen Fabrics of Cleveland
Robert Allen Fabrics of Houston
<PAGE>
2
Trade, "Doing Business As"
Seller or Assumed Name[s]
- ------ --------------------------
Universal Furniture Industries, Bench Craft
Inc. 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
<PAGE>
Schedule 6 to the
Amended and Restated 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) during the initial Accrual Period, 98.50% 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.
D = Processing Expense Reserve Percentage, which will equal 1/4% and reflects
the cost of the Company's overhead,
<PAGE>
2
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.
<PAGE>
Exhibit 10.13
FIRST AMENDMENT TO
STOCKHOLDERS AGREEMENT
First Amendment dated as of December 17, 1996 to the Stockholders Agreement
dated as of August 5, 1996 (the "Stockholders Agreement") among FURNISHINGS
INTERNATIONAL INC. and its stockholders; defined terms used herein and not
otherwise defined are used herein as defined in the Stockholders Agreement.
Certain managers have expressed a desire to give a limited number of shares
of HFG Common Stock to their own parents or to their spouse's parents, which
gifts would require an amendment to the current definition of "Permitted
Transferee" in the Stockholders Agreement.
The undersigned wish to effect such an amendment, so long as the total
number of shares of HFG Common Stock so transferred does not exceed 1,000 shares
in the aggregate (i.e., 0.1% of the HFG Common Stock on a Fully-Diluted Basis).
The undersigned have the authority to effect such an amendment pursuant to
Sections 7.2 and 7.4 of the Stockholders Agreement.
Accordingly, the undersigned hereby amend clause (i) of the definition of
"Permitted Transferee" in Section 1.1(a) of the Stockholders Agreement by adding
the following proviso to the end of such clause:
"provided, however, that the Chairman of the Company may permit any
manager to give a specified number of shares of HFG Common Stock to his or
her parents, to his or her spouse's parents, or to any thereof, so long as
the total number of shares of HFG Common Stock transferred by all such
managers pursuant to this proviso does not exceed 1,000 shares in the
aggregate (with appropriate adjustments for stock splits, stock dividends,
and stock combinations)."
In Witness Whereof, the undersigned have executed this First Amendment
(which may be executed in multiple counterparts) as of the date first written
above.
MASCO CORPORATION 399 VENTURE PARTNERS, INC.
By:____________________________ By:______________________________
Its: Senior Vice President and Its:
General Counsel
_____________________________________
Douglas C. Barnard, as Voting Trustee
Under an Agreement Dated August 5, 1996
<PAGE>
FURNISHINGS INTERNATIONAL, INC.
By: __________________________
Its Vice President
First Amendment to
Stockholders Agreement
<PAGE>
Exhibit 10.14
Second Amendment
SECOND AMENDMENT TO
STOCKHOLDERS' AGREEMENT
Second Amendment to Stockholders' Agreement (this "Amendment") dated
as of March 26, 1997 by and among FURNISHINGS INTERNATIONAL INC., a Delaware
corporation (the "Company"), Masco Corporation, a Delaware corporation
("Masco"), 399 Venture Partners, Inc., a Delaware corporation ("399") and
Douglas C. Barnard, as Voting Trustee under the Voting Trust Agreement (the
"Trustee").
RECITALS
WHEREAS, the Company, Masco, 399 and the Management Stockholders are
parties to the Stockholders' Agreement dated as of August 5, 1996 by and among
the Company and its stockholders (as previously amended, the "Agreement");
(capitalized terms not otherwise defined herein are used as defined in the
Agreement);
WHEREAS, 399 has the right, as the holder of HFG Common Stock
representing more than fifty percent (50%) of the HFG Common Stock on a
Fully-Diluted Basis then held by the Institutional Stockholders as a group,
pursuant to Section 7.4(a)(i) of the Agreement to take action on behalf of the
Institutional Stockholders;
WHEREAS, the Trustee has the right pursuant to Section 7.4(a)(iii)
of the Agreement to take action on behalf of the Management Stockholders; and
WHEREAS, the parties hereto desire to amend the Agreement to provide
for a board of directors of the Company comprised of 11 persons instead of 7, to
effect changes in the weighted voting of such directors and to effect certain
other amendments.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
SECTION 1. AMENDMENTS
1.1 Definition of Vested Shares. Clause (ii) of the definition of
"Vested Shares" is hereby amended and restated in its entirety so that it reads
as follows:
(ii) with respect to Management Securities (other than
Purchased Shares or Restricted Preferred Securities) acquired
by any Management Stockholder or Additional Management
Stockholder after the Closing, the shares which are "Vested
Shares"
1
<PAGE>
Second Amendment
as provided by written agreement approved by the Board (acting
by Affirmative Board Vote) between the Company and such
Management Stockholder or Additional Management Stockholder,
as the case may be (it being understood that in the absence of
any such agreement all such acquired shares shall vest on a
five-year vesting schedule with 20% of such shares being
vested at the end of each anniversary of the date of original
acquisition thereof).
1.2 Board of Directors. Section 5.1(a) of the Agreement is hereby
amended and restated in its entirety so that it reads as follows:
(a) From and after the date hereof, each of the Stockholders shall
vote or cause to be voted all of its shares of voting Common Stock
(in the Series or Class as described below), at any regular or
special meeting of stockholders called for the purpose of filling
positions on the Board, or to execute a written consent in lieu of
such a meeting of stockholders for the purpose of filling positions
on the Board, and shall take all actions necessary, to ensure that
the Board consists of eleven (11) members as follows:
(i) shares of Series A-1 Common Stock shall be voted so as to
elect four (4) individuals (individually, an "Institutional
Director," and collectively, the "Institutional Directors") to
be designated by the Institutional Stockholders for so long as
the Institutional Stockholders own (x) shares of Series A-1
Preferred or (y) at least ten percent (10%) of the outstanding
HFG Common Stock on a Fully-Diluted Basis, and thereafter by
the Nominating Committee; provided, that, at any time, and
from time to time, the Institutional Stockholders, in their
sole discretion, may determine not to designate one or all of
the Institutional Directors, in which case such Institutional
Directors shall be designated by the Nominating Committee;
(ii) two (2) individuals to be designated by vote of a
majority of the outstanding shares of Class C Common, voting
separately as a class (individually, a "Management Director,"
and collectively, the "Management Directors") each of whom
must be either (A) the Chief Executive Officer (or President),
the Chief Operating Officer, the Secretary, the General
Counsel, the Chief Financial Officer (or Treasurer) or the
Chief Accounting Officer of the Company, (B) a holder of Class
C Common or (C) with the
2
<PAGE>
Second Amendment
consent of the Nominating Committee, any person other than the
persons described in clause (A) or clause (B),
(iii) shares of Series A-2 Common Stock shall be voted so as
to elect one (1) individual (the "Masco Director") to be
designated by the Masco Stockholders, for so long as the Masco
Stockholders own (x) shares of Series A-1 Preferred, (y) at
least five percent (5%) of the outstanding HFG Common Stock on
a Fully-Diluted Basis or (z) any Senior Notes; provided, that,
at any time, and from time to time, the Masco Stockholders, in
their sole discretion, may determine not to designate the
Masco Director, in which case such Masco Director shall be
designated by the Nominating Committee; and
(iv) subject to the exercise of the Regulatory Right under
Section 5.9, shares of Series A-3 Common Stock shall be voted
so as to elect four (4) individuals (each individually, a
"Disinterested Director," and collectively, the "Disinterested
Directors"), each of whom is not (A) an Affiliate of 399, (B)
employed by the Company or any Subsidiary of the Company or
(C) a Stockholder or an Affiliate of any Stockholder, such
Disinterested Directors to be designated by the Nominating
Committee;
provided, however, that (x) effective at the Closing, the Board
shall consist of the individuals set forth on Exhibit C hereto in
the categories shown thereon and (y) the Stockholders shall cause
the Institutional Directors, the Masco Director and the Management
Directors named thereon to be designated and elected as directors,
and not to be removed by any Stockholder without cause, until
January 1, 1998 unless such person resigns, is otherwise unable to
serve or ceases to qualify as a Management Director under Section
5.1(a)(ii)). The Nominating Committee shall initially consist of one
(1) Management Director, one (1) Institutional Director and one (1)
Disinterested Director (collectively, the "Nominating Committee"),
and upon the Closing the Nominating Committee shall consist of the
individuals set forth on Exhibit C hereto in the categories shown
thereon. The Nominating Committee shall act by majority vote,
provided that, if for any reason there shall be less than three (3)
directors on the Nominating Committee, it shall act by the unanimous
vote of the remaining director(s) on the Nominating Committee. In
the event that for any reason a Disinterested Director on the
Nominating Committee resigns or is removed from the Nominating
Committee or from the Board, the
3
<PAGE>
Second Amendment
Nominating Committee shall (acting by the unanimous vote of the
remaining directors on the Nominating Committee) replace such
Disinterested Director with one (1) of the other Disinterested
Directors as determined by the Nominating Committee (provided that,
if the Nominating Committee fails to agree on the replacement
Disinterested Director, then the Disinterested Directors may select
by unanimous designation the Disinterested Director to serve on the
Nominating Committee). In the event that the Management Stockholders
do not designate any or either of the Management Directors, the
Nominating Committee will select one (1) additional Disinterested
Director who shall also serve on the Nominating Committee which will
then consist of two (2) Disinterested Directors and one (1)
Institutional Director.
1.3 Weighted Board Voting. Section 5.4(a) of the Agreement is hereby
amended and restated in its entirety so that it reads as follows:
(a) The directors on the Board shall have weighted votes which
together total 1,000 votes, with each director having a number of
such votes equal to the percentage set forth below:
(i) each Management Director will have a weighted vote of
10.5%, except that in the event that Wayne B. Lyon is one of
the Management Directors, his weighted vote will be shifted to
3.5% and the other Management Director's weighted vote will be
shifted to 17.5%, unless and until (A) the Company receives a
notice from Mr. Lyon or Masco that Mr. Lyon is no longer a
member of the board of directors of Masco or (B) Wayne B. Lyon
is no longer a Management Director, at which time the weighted
votes of both of the Management Directors will shift back to
their original positions of 10.5% each.
(ii) the Masco Director will have a weighted vote of 15%;
(iii) each of the Institutional Directors will have a weighted
vote of 12.25%, except that in the event there are more than
50 stockholders of the Company, such weighting shall, upon
notice to the Company from the Institutional Stockholders, be
shifted to 4.75% each, with a corresponding shift in the
weighting of each of the Disinterested Director's weighted
vote from 3.75% to 11.25%; thereafter the Institutional
Stockholders shall have the right upon
4
<PAGE>
Second Amendment
notice to the Company to increase the weighting back to its
original position; and
(iv) each Disinterested Director will have a weighted vote of
3.75% (subject to shifting as described in clause (iii)
above); such weighting shall be unaffected if one or more of
the Disinterested Directors is replaced or designated by the
Institutional Stockholders pursuant to the Regulatory Right.
SECTION 2. MISCELLANEOUS
2.1 Further Actions. Each of the parties hereto shall cooperate and
shall take further action and shall execute and deliver such further documents
as may be reasonably requested by any other party in order to carry out the
amendments set forth herein.
2.2 Governing Law. This Amendment shall be governed and construed in
accordance with the laws of the State of New York, without giving effect to any
choice of law or conflict of law provision or rule that would cause the
application of the laws of any jurisdiction other than the State of New York,
except to the extent that the General Corporation Law of the State of Delaware
applies as a result of the Company being incorporated in the State of Delaware,
in which case such General Corporation Law shall apply.
2.3 Headings. The headings used in this Amendment have been inserted
for convenience of reference only and do not define or limit the provisions
hereof.
2.4 Counterparts. This Amendment may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
2.5 Consent to Jurisdiction; Service of Process; Waiver of Jury
Trial. The provisions of Sections 7.18 and 7.19 of the Agreement shall apply to
this Amendment as if repeated herein.
[Remainder of Page Intentionally Left Blank]
5
<PAGE>
Second Amendment
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Amendment as of the date first above written.
FURNISHINGS INTERNATIONAL INC.
By:__________________________________________
Wayne B. Lyon
President and Chief Executive Officer
MASCO CORPORATION
By:__________________________________________
John R. Leekley
Senior Vice President
399 VENTURE PARTNERS, INC.
By:__________________________________________
David F. Thomas
President
_____________________________________________
Douglas C. Barnard, as Voting Trustee
[Signature Page to Second Amendment]
6
<PAGE>
Exhibit 10.21
LFI RETIREMENT
BENEFIT RESTORATION PLAN
SECTION 1
ADOPTION OF PLAN
1.1 Adoption and History. Lifestyle Furnishings International Ltd.
("LFI") hereby adopts the LFI Retirement Benefit Restoration Plan ("Plan"),
effective August 5, 1996 ("Effective Date"). The Plan was adopted by LFI in
connection with the sale by Masco Corporation of certain of its businesses on
the Effective Date to LFI's parent, Furnishings International, Inc. ("FII"). The
Plan is intended to have substantially identical provisions and coverage to the
Masco Corporation Retirement Benefit Restoration Plan ("Masco Plan") and
succeeds to the Masco Plan by assuming liability for all benefits accrued under
the Masco Plan prior to the Effective Date by those persons who were employed on
the Effective Date in Masco's businesses sold to FII, and by continuing to
provide for such benefits accrued through the Effective Date as well as
additional benefits which may be accrued under this Plan on and after the
Effective Date.
1.2 Purpose. The sole purpose of the Plan is to provide to a select
group of management or highly compensated employees benefits that would be
provided to such employees who terminate employment or retire after the
Effective Date under certain retirement plans of LFI which plans are set forth
in Appendix "A" hereto and are qualified plans under Section 401(a) of the
Internal Revenue Code of 1986, as amended ("Code") (the "Qualified Plans"), but
for the benefit limitations of the Code, in order to encourage the continued
employment and diligent service of such employees with LFI following the
Effective Date. Accordingly (by way of example and not limitation), in no event
shall the provisions of the Plan be construed to benefit any employee whose
termination of employment occurred prior to the Effective Date.
1.3 Construction. The Plan shall be construed in accordance with
North Carolina law, except where preempted by federal law. It is intended that
the Plan shall be unfunded and maintained by LFI primarily for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees, so that the Plan is exempt from the requirements of Parts
2, 3 and 4 of the Employee Retirement Income Security Act of 1974, as amended
(ERISA). All provisions of the Plan shall be interpreted in accordance with such
intentions.
1
<PAGE>
SECTION 2
COVERAGE
2.1 Covered Employees. The coverage of the Plan shall be limited to
highly-compensated or management employees of LFI and of the parent and
subsidiaries of LFI who participate in the Qualified Plans which are listed in
Appendix "A" and who (a) receive from LFI or the parent or subsidiary of LFI
which is the employer of such person compensation otherwise eligible for
coverage under the terms of such Qualified Plan for any calendar year which
compensation exceeds $150,000 or such other adjusted limit as provided by
Section 401(a)(17) of the Code, or (b) whose benefits or contributions under the
Qualified Plans are reduced due to the application of Section 415 of the Code.
2.2 Commencement and Cessation of Coverage. An employee shall be
covered under the Plan commencing on the later of (a) the Effective Date or (b)
the earlier of the date that his plan-eligible compensation described in Section
2.1 first exceeds the annual limitation amount described in Section 2.1 or the
date his benefits or contributions under the Qualified Plans are first reduced
by the application of Code Section 415. An employee covered under the provisions
of the Masco Plan immediately prior to the Effective Date shall be covered under
the Plan commencing on the Effective Date whether or not he satisfies the
requirements of these Sections 2.1 and 2.2 to the extent of his accrued benefit
as of the Effective Date under the Masco Plan, and such an employee's service
for the purposes of this Plan shall be deemed to include periods of employment
and levels of compensation accrued prior to the Effective Date under the
provisions of the Masco Plan unless his termination from coverage under the
Masco Plan was by reason of retirement or early retirement under the provisions
of any of the Qualified Plans listed in Appendix "A" to the Masco Plan. An
employee shall cease to be covered by the Plan on his date of termination of
employment from LFI, its parent and its subsidiaries. If prior to such
termination an employee ceases to qualify for coverage under the Plan due to
some other event (by way of examples and not as limitation, a decrease in
Plan-eligible compensation or the commencement of employment with a LFI
subsidiary which has no Qualified Plan or has discontinued its Qualified Plan),
his coverage under the Plan shall cease as of the time such disqualifying event
occurs and only the benefits accrued hereunder (including without limitation the
portion, if any, of such accrued benefit that was assumed from the Masco Plan)
up to such time shall be payable from this Plan.
-2-
<PAGE>
SECTION 3
BENEFITS
3.1 Amount. Subject to Section 3.3 hereof, a covered employee shall
be entitled to either or both, as applicable, the supplemental retirement
benefits described below:
(a) An annual amount equal to the benefit which would have
been payable to the employee under any defined benefit (pension)
Qualified Plan in which he is a participant ("Qualified Pension
Plan") but for any benefit limitations imposed by the Code on the
computation of such benefit, reduced (but not below zero) by
(b) any benefits which the employee is eligible to receive,
prior to the giving effect to any qualified domestic relations
order, under any such Qualified Pension Plan,
each benefit being expressed for this purpose in the normal form of payment
under said Qualified Pension Plan, plus
(c) A single lump sum payment equal to the sum of amounts
which would have been contributed to the account of the employee as
a company contribution with respect to periods after December 31,
1993 under any defined contribution (profit sharing) Qualified Plan
in which he is a participant (but in no case including any amounts,
however characterized, which the employee or the company may have
contributed to any such plan pursuant to the provisions of Section
401(k) or 401 (m) of the Code) ("Qualified Profit Sharing Plan") but
for any benefit limitations imposed by the Code on the contribution
amount, plus
(d) investment adjustments applied to the contribution amounts
of Section 3.1 (c) which adjustments shall be applied to such
accounts (i) utilizing the same provisions for calculating the
effect of investment earnings (or losses) as prevail under the terms
of any such Qualified Profit Sharing Plan and (ii) utilizing the
amount of investment earnings (or loss) as is experienced in a given
year in the LFI Master Profit Sharing Trust (or, applicable, its
predecessor Masco Trust) or other investment vehicle in which the
assets of any such Qualified Profit Sharing Plan are invested (and
in no case applying any adjustments for forfeitures of any kind)
reduced (but not below zero) by
(e) the covered employee's account balance attributable to
company profit sharing contributions made with respect to periods
after December
-3-
<PAGE>
31, 1993 which the employee is eligible to receive, prior to the
giving effect to any qualified domestic relations order, under any
such Qualified Profit Sharing Plan,
provided, however, that any lump sum payment made pursuant to this Plan shall
have no adjustment the purpose of which is to make such payment equivalent after
the effect of any taxes which may have to be paid by the employee because such
lump sum payments from this Plan are taxable when received as ordinary income
and may not be eligible for rollover or other tax-advantaged treatment under the
Code; and provided, further, that the amounts attributable to any Qualified
Pension Plan and Qualified Profit Sharing Plan for the purposes of the offsets
described in the foregoing subsections 3.1 (b) and 3.1 (e) shall be deemed to
include similar sums which any covered employee shall be entitled to receive
under the provisions of any qualified pension or profit sharing plan to which
contributions were made at any time by Masco.
3.2 Timing and Form of Payments. (a) Retirement benefit payments
hereunder which are supplemental to a Qualified Pension Plan shall be made at
the same time as benefit payments are made from the Qualified Pension Plan and
shall be payable (i) for an employee who is unmarried at the time payments
commence, in the form of a single life annuity, or (ii) for any employee who is
married when payments commence, in the form of a 50% joint and survivor annuity
with the employee's spouse, unless, in either case, the employee validly elects
another form of payment for benefits under the Qualified Pension Plan, in which
case the supplemental retirement benefit hereunder shall be paid in the same
form as benefits are paid under the Qualified Pension Plan, computed using the
same formulas and actuarial factors as set forth for the determination of
optional forms of benefits under such plan; for purposes of this Section 3.2(a),
an employee's marital status and spouse shall be determined in accordance with
the Qualified Pension Plan.
(b) Retirement benefit payments hereunder which are supplemental to
a Qualified Profit Sharing Plan shall be payable in a lump sum and shall be made
at the time and to the same person as the lump sum payment is made from the
Qualified Profit Sharing Plan.
3.3 Forfeitability. Payment of benefits under the Plan shall be
conditioned upon receipt of benefit payments from the respective Qualified Plans
and shall be vested in the same manner and to the same extent as benefits under
such Qualified Plans.
3.4 No Payment During Employment. Notwithstanding the foregoing, no
periodic payments computed under paragraphs (a) and (b) of Section 3.1 of this
Plan shall be made during such time as any person both receives payments from
any Qualified Plan and is employed by LFI or any affiliated company, and no lump
sum payment computed under paragraphs (c), (d) and (e) of Section 3.1 of this
Plan shall be made until after the covered employee's termination of employment.
-4-
<PAGE>
SECTION 4
COST OF BENEFITS
4.1 Current Expense. The entire cost of providing benefits under the
Plan, including the costs of the Plan Administrator, shall be paid by LFI out of
its current operating budget, and LFI's obligations under the Plan shall be an
unfunded and unsecured promise to pay. LFI shall not be obligated under any
circumstances to separately fund its obligations under the Plan.
4.2 Option to Fund Informally. Notwithstanding Section 4.1, LFI may,
at its sole option, or by agreement, informally fund its obligations under the
Plan in whole or in part, provided, however, in no event shall such informal
funding be construed to create any trust fund, escrow account or other security
for an employee with respect to the payment of benefits under the Plan, other
than as permitted under Internal Revenue Service and Department of Labor rules
and regulations for unfunded supplemental retirement plans. Furthermore, if LFI
decides to informally fund the Plan, in whole or in part, by procuring, as
owner, life insurance for its own benefit on the lives of employees, the form of
such insurance and the amounts thereof shall be the sole decision of LFI, and in
no event shall an employee have any incidents of ownership in any such policies
of insurance.
4.3 Physical Examinations. If a physical examination is required for
LFI to obtain insurance for covered employees under Section 4.2, each employee
agrees to undergo such physical examinations as may be required by the insurance
carrier. Such physical examinations shall be conducted by a physician approved
by LFI, at the expense of LFI.
4.4 No Employee Contributions or Loans. No loans or hardship
distributions or contributions by employees are permitted or required under the
Plan.
5
<PAGE>
SECTION 5
ADMINISTRATION
5.1 Plan Administrator and Named Fiduciary. The Plan Administrator
and Named Fiduciary of the Plan for purposes of ERISA shall be LFI whose
business address is P.O. Box 7599, High Point, NC 27264, and whose telephone
number is 910/476-4777. LFI shall have the right to change the Plan
Administrator and Named Fiduciary of the Plan at any time, and to change the
address and telephone number of the same. LFI shall give each covered employee
written notice of any such change in the Plan Administrator and Named Fiduciary,
or in the address or telephone number of the same.
5.2 Claims Procedure. The Plan Administrator has the power to
interpret all provisions of the Plan and make final determinations concerning
the meaning of the Plan and the right of any person to benefits under the Plan.
Each covered employee, or other person claiming through the
employee, must file a written claim for benefits with the Plan Administrator as
a prerequisite to the payment of benefits under the Plan. Any denial by the Plan
Administrator of a claim for benefits under the Plan by an employee or other
person (collectively referred to as "claimant") shall be stated in writing by
the Plan Administrator and delivered or mailed to the claimant within 90 days
after receipt of the claim, unless special circumstances require an extension of
time for processing the claim. If such an extension of time is required, written
notice of the extension shall be furnished to the claimant prior to the
termination of the initial 90-day period. In no event shall such extension
exceed a period of 90 days from the end of the initial period.
Any notice of denial shall set forth the specific reasons for the
denial, specific reference to pertinent provisions of the Plan upon which the
denial is based, a description of any additional material or information
necessary for the claimant to perfect his claim, with an explanation of why such
material or information is necessary, and any explanation of claim review
procedures under the Plan, written to the best of the Plan Administrator's
ability in a manner that may be understood without legal or actuarial counsel.
A claimant whose claim for benefits has been wholly or partially
denied by the Plan Administrator may request, within 90 days following the date
of such denial, in a writing addressed to the Plan Administrator, a review of
such denial. The claimant shall be entitled to submit such issues or comments in
writing or otherwise, as he shall consider relevant to a determination of his
claim, and may include a request for a hearing in person before the Plan
Administrator. Prior to submitting his request, the claimant
-7-
<PAGE>
shall be entitled to review such documents as the Plan Administrator shall agree
are pertinent to his claim. The claimant may, at all stages of review, be
represented by counsel, legal or otherwise, of his choice, provided that the
fees and expenses of such counsel shall be borne by the claimant.
All requests for review shall be promptly resolved. The Plan
Administrator's decision with respect to any such review shall be set forth in
writing and shall be mailed to the claimant not later than 60 days following
receipt by the Plan Administrator of the claimant's request unless special
circumstances, such as the need to hold a hearing, require an extension of time
for processing, in which case the Plan Administrator's decision shall be so
mailed not later than 120 days after receipt of such request.
5.3 Arbitration. Exhaustion of the claim and claim review procedures
of Section 5.2 is prerequisite to any further consideration of a claim. In the
event that any claim remains fully or partially unresolved after exhaustion of
the claim and claim review procedures of Section 5.2, any remaining dispute
shall, within 30 days of the date of the Plan Administrator's final decision on
review, be submitted to arbitration, which shall be the sole and exclusive
remedy. The arbitration decision shall be final and binding on the Plan, LFI,
the claimant, and any other party involved. All claims shall be arbitrated in
High Point, North Carolina. The arbitrator shall be chosen in accordance with
the Voluntary Labor Arbitration Rules of the American Arbitration Association
then in effect, and the expense of the arbitration shall be shared equally by
LFI and the claimant. Any claim shall be deemed waived unless presented within
the time limits specified in Section 5.2 and this Section 5.3. The arbitrator
shall not have jurisdiction or authority to change, add to or subtract from any
of the provisions of the Plan. The arbitrator's sole authority shall be to
interpret or apply the provisions of the Plan. Because arbitration is the
exclusive remedy with respect to any claim hereunder, neither LFI, the claimant
nor any other party has the right to resort to any federal, state or local court
or administrative agency concerning any claim, and the decision of the
arbitrator shall be a complete defense to any suit, action or proceeding
instituted in any federal, state or local court or before any administrative
agency with respect to any dispute which is arbitrable as herein set forth. The
arbitration provisions hereof shall, with respect to any claim, survive the
termination of the Plan.
-8-
<PAGE>
SECTION 6
LIMITATION OF COVERED EMPLOYEE'S RIGHTS
6.1 No Contract of Employment. The Plan shall not be deemed to
create a contract of employment between LFI, its parent or any LFI subsidiary
and any covered employee and shall create no right in any covered employee to
continue in the employ of LFI, its parent or any of its subsidiaries for any
specific period of time, or to create any other rights in any covered employee
or obligations on the part of LFI or its parent, except as are set forth
explicitly herein or in a written employment contract. In consideration of his
coverage hereunder each covered employee shall be deemed to have agreed that LFI
or its parent has the right to terminate him at any time, with or without cause,
and nothing in the Plan shall restrict the right of any covered employee to
terminate his employment.
6.2 Unsecured Creditor. The rights of any employee or any person
claiming through the employee under the Plan shall be solely those of an
unsecured general creditor of LFI. Any employee, or any person claiming through
the employee, shall only have the right to receive from LFI those payments as
specified herein. Each covered employee agrees that he or any person claiming
through him shall have no rights or interests in any asset of LFI, including any
insurance policies or contracts which LFI may possess to informally fund the
Plan.
6.3 No Trust. No asset used or acquired by LFI in connection with
the liabilities it has assumed under the Plan shall be deemed to be held under
any trust for the benefit of any employee, nor shall any such asset be
considered security for the performance of the obligations of LFI, but shall be,
and remain, a general unpledged and unrestricted asset of LFI, except as may be
provided by separate agreement and as permitted under Internal Revenue Service
and Department of Labor rules and regulations for unfunded supplemental
retirement plans.
-9-
<PAGE>
SECTION 7
AMENDMENT OR TERMINATION
7.1 Right to Amend or Terminate Plan. LFI reserves the right to
amend the Plan in any manner deemed appropriate by LFI's Board of Directors, and
LFI reserves the right to terminate the Plan for any reason and at any time in
whole or part by action of the Board of Directors.
7.2 Limitations. Notwithstanding Section 7.1, no such amendment or
termination shall reduce or otherwise affect the benefits (including those
benefits assumed by this Plan which were accrued pursuant to the Masco Plan
prior to the Effective Date) payable to or on behalf of any covered employee
that have accrued prior to such amendment or termination without the written
consent of the employee (or beneficiary, if applicable). In addition, the
complete or partial termination of this Plan, should it occur or be deemed by
facts and circumstances to have occurred, shall have the same effect on the
vesting of benefits accrued to date under this Plan as in the case of a complete
or partial termination of a Qualified Plan.
7.3 Payment of Benefits Upon Termination. Upon termination or
partial termination of the Plan LFI may elect the method by which benefits
accrued through the date of such termination or partial termination shall be
provided. Such election may include the payment of the present value of all such
accrued benefits directly to covered employees (or beneficiaries, if applicable)
or any other method of payment or funding which LFI may, in its sole discretion,
determine.
-10-
<PAGE>
SECTION 8
MISCELLANEOUS PROVISIONS
8.1 Independence of Benefits. Except as otherwise provided herein or
pursuant to the terms of any separate agreement with an employee, the benefits
payable under the Plan shall be independent of, and in addition to, any other
benefits or compensation, whether by salary, or bonus or otherwise, payable
under any employment agreements that now exist or may hereafter exist from time
to time between LFI and any employee. The Plan does not involve a reduction in
salary or foregoing of an increase in future salary by any employee, nor does
the Plan in any way affect or reduce the existing and future compensation and
other benefits of any employee.
8.2 Nonalienation of Benefits. Except insofar as this provision may
be contrary to applicable law (such as an order of divorce or separation), no
sale, transfer, alienation, assignment, pledge, collateralization, or attachment
of any benefits under the Plan shall be valid or recognized by LFI.
8.3 Payments for the Benefit of Employee. In the event that LFI
shall find that any person to whom a benefit is payable under the Plan is unable
to care for his affairs because of illness or accident, is otherwise mentally or
physically incompetent, or is unable to give a valid receipt, LFI may cause the
payments becoming due to such person to be paid to another individual for such
person's benefit, without responsibility on the part of LFI to follow
application of such payment. Any such payment shall be a payment on account of
such person and shall operate as a complete discharge of LFI from all liability
under the Plan.
8.4 Use of Words. Wherever any words are used in the Plan in the
masculine gender, they shall be construed as though they also were used in the
feminine gender in all cases where they would so apply, and wherever any words
are used in the Plan in the singular forms they shall be construed as though
they also were used in the plural form in all cases where they would so apply,
and vice versa.
8.5 Headings. Headings of Sections herein are inserted for
convenience of reference. They constitute no part of the Plan and are not to be
considered in the construction of the Plan.
8.6 Savings Clause. If any provisions of the Plan shall be for any
reason invalid or unenforceable, the remaining provisions nevertheless shall be
carried into effect.
-11-
<PAGE>
SECTION 9
DEFINITIONS
Terms capitalized in the text of this Plan shall have the meanings
referred to below, unless the context requires otherwise. Terms not defined
herein shall be construed in reference to the same or similar terms as used in
the applicable Qualified Plan.
9.1 Code. See Section 1.2.
9.2 Effective Date. See Section 1.1.
9.3 ERISA. See Section 1.3.
9.4 Plan. See Section 1.1.
9.5 LFI. See Section 1.1.
-12-
<PAGE>
SECTION 10
EXECUTION
IT WITNESS WHEREOF, Lifestyle Furnishings Intemational Ltd. has
caused the Plan to be executed on August 5, 1996.
Lifestyle Furnishings International Ltd.
By: _____________________________________
Its: Vice President
-------------------
-13-
<PAGE>
APPENDIX A
LFI RETIREMENT PLANS LIST
DEFINED BENEFIT PLANS DEFINED CONTRIBUTION PLANS
Berkline Associates Pension Plan
LFI Employees' Pension Plan LFI Future Service Profit Sharing Plan
LFI Salaried LFI Master Defined
Employees' Pension Plan Contribution Plan
-14-
<PAGE>
Exhibit 10.22
FURNISHINGS INTERNATIONAL INC.
RESTRICTED STOCK PLAN
Section 1. Purpose
The Plan authorizes the Chairman to provide employees, directors and
consultants of the Corporation or its subsidiaries, who are in a position to
contribute materially to the long-term success of the Corporation or its
subsidiaries, with shares of Common Stock of the Corporation, the full enjoyment
of which may conditioned upon a specified period of future employment. The
Corporation believes that this incentive program will cause those persons to
increase their interest in the welfare of the Corporation and its subsidiaries,
and aid in attracting and retaining employees, directors and consultants of
outstanding ability.
Section 2. Definitions
Unless the context clearly indicates otherwise, the following terms, when
used in the Plan, shall have the meanings set forth in this Section:
(a) "Board" means the Board of Directors of the Corporation.
(b) "Chairman" means initially, the Chairman, President, and Chief
Executive Officer of the Corporation so long as such position shall be held by
Wayne B. Lyon, and thereafter such person or persons as shall be designated by
the Board.
(c) "Common Stock" means shares of Class C Common Stock, par value $.01
per share, of the Corporation, or any shares of stock of the Corporation into
which the Class C Common Stock is converted.
(d) "Consultant" means any person who is engaged to perform services for
the Corporation or any subsidiary of the Corporation, other than as an Employee
or Director.
(e) "Corporation" means FURNISHINGS INTERNATIONAL INC., a Delaware
corporation.
(f) "Director" means any member of the Board.
-1-
<PAGE>
(g) "Employee" means any employee of the Corporation or any subsidiary of
the Corporation, including directors who are otherwise employed thereby.
(h) "Grantee" means a person granted shares of Restricted Stock under the
Plan.
(i) "Plan" means this Restricted Stock Plan as set forth herein and as
amended from time to time.
(j) "Restricted Stock" means a share of Common Stock granted pursuant to
the Plan that is subject to such restrictions as authorized pursuant to Section
5.
Section 3. Shares of Common Stock Subject to the Plan
Subject to adjustment as provided in Section 6, the Common Stock which may
be issued as Restricted Stock pursuant to the Plan shall not exceed 17,122
shares in the aggregate. Common Stock issuable under the Plan may be authorized
but unissued shares or reacquired shares of Common Stock. Unless otherwise
determined by the Board with the concurrence of the Chairman, shares of
Restricted Stock that are forfeited or are canceled for any reason shall become
available for reissuance under the Plan.
Section 4. Administration of the Plan
The Plan shall be administered by the Chairman. Subject to the express
provisions of the Plan, the Chairman shall have the authority to interpret the
Plan, to prescribe, amend, and rescind rules and regulations relating to the
Plan, to determine the terms and provisions of grant certificates thereunder and
to make all other determinations necessary or advisable for the administration
of the Plan. All interpretations and determinations made by the Chairman in
accordance with the provisions of the Plan shall be final and binding.
Section 5. Grant of Restricted Stock
The Chairman shall determine and designate from time to time in his sole
discretion:
(i) Employees who are to be granted Restricted Stock (except that
grants to the Chairman himself shall require the prior
approval of the Board as set forth below in this Section 5),
and
(ii) the number of shares of Common Stock subject to each such
grant.
-2-
<PAGE>
Restricted Stock shall be granted exclusively in consideration of
services.
Without the prior approval of the Board (acting by Affirmative Board Vote
(as such term is defined in the Stockholders' Agreement, dated as of August 5,
1996, among the Corporation and its stockholders (the "Stockholders'
Agreement")), the type and duration of the restrictions that shall be applicable
to the Restricted Stock, including, but not limited to, conditions relating to
the vesting of the shares and their transferability, shall be identical to those
set forth in the Stockholders' Agreement.
Section 6. Adjustment Upon Changes in Capitalization
In the event of any reclassification, recapitalization, merger,
consolidation, reorganization, stock dividend, stock split or reverse stock
split, or any other similar change in corporate structure which, in the
judgement of the Board affects the value of the shares of Common Stock, the
Board may make proportional adjustments to the number and class of shares
available for issuance hereunder and the number and class of shares of
Restricted Stock theretofore granted.
Section 7. Additional Restrictions on Shares
In addition to the restrictions that may be imposed under Section 5, the
Chairman and/or the Board may require that the Corporation receive from the
Grantee representations, warranties and agreements to the effect, among others,
that the Common Stock to be acquired by the Grantee is being acquired for
investment only and not with a view toward distribution of such Common Stock;
that the Grantee will not dispose of such Common Stock except in transactions
which, in the opinion of counsel to the Corporation, would comply with the
registration provisions of the 1933 Act and all other applicable laws and
regulations; that the Grantee will agree to be bound by the terms and conditions
set forth in any stockholders' agreement or voting trust then in effect and will
become a party thereto; and that the Grantee will be bound with respect to such
Common Stock by the terms and conditions of such restrictions on voting or
transfer as the Corporation may deem necessary or desirable (including, but not
limited to, restrictions that are required or recommended by an underwriter in
connection with a public offering). The Corporation may cause a legend or
legends to be placed on any certificates representing shares issued pursuant to
the Plan.
Section 8. General Provisions
(a) Each Restricted Stock grant shall be evidenced by a written grant
certificate containing such terms and conditions, not inconsistent with the
Plan, as the Chairman shall approve.
-3-
<PAGE>
(b) The grant of Restricted Stock in any year shall not give the Grantee
any right to similar grants in future years or any right to continue such
Grantee's employment relationship with the Corporation or any subsidiary of the
Corporation. All Grantees shall remain subject to discharge to the same extent
as if the Plan were not in effect.
(c) No Grantee, and no beneficiary or other persons claiming under or
through the Grantee, shall have any right, title or interest by reason of any
grant of Restricted Stock to any particular assets of the Corporation or any
subsidiary of the Corporation, or any shares of Common Stock allocated or
reserved for the purposes of the Plan.
(d) The Corporation shall have the right to require that the Grantee make
such provision, or furnish the Corporation such authorization, necessary or
desirable so that the Corporation or any subsidiary of the Corporation may
satisfy its obligation, under applicable laws, to withhold or otherwise pay for
income or other taxes of the Grantee attributable to the grant or vesting of
Restricted Stock.
(e) The validity, construction, and effect of the Plan, any rules and
regulations relating to the Plan, and any grant certificate shall be determined
in accordance with the Delaware General Corporation Law, without giving effect
to principles of conflicts of laws, and applicable federal law.
Section 9. Amendment or Termination
The Board, with the concurrence of the Chairman, may alter, amend,
suspend, discontinue or terminate the Plan at any time; provided, however, that
no such action shall adversely affect the rights of Grantees of Restricted Stock
previously granted hereunder and, provided further, however, that any
stockholder approval necessary in order to comply with applicable law or
regulation shall be obtained in the manner required therein.
Section 10. Effective Date of Plan
The Plan shall be effective as of August 5, 1996.
-4-
<PAGE>
Exhibit 21
Subsidiaries
Jurisdiction of
Incorporation
Name or Organization
---- ---------------
LIFESTYLE FURNISHINGS INTERNATIONAL LTD. Delaware
LIFESTYLE HOLDINGS, LTD Delaware
Ametex Fabrics, Inc. Delaware
Ametex U.K. Limited United Kingdom
Ametex Sarl France
Green & Kirk Limited United Kingdom
Herbert Green (Silsden) Ltd. United Kingdom
The Berkline Corporation Delaware
Berkline Inc. Quebec
Dixie Furniture Company Incorporated Delaware
Drexel Heritage Furnishings Inc. New York
D-H Retail Space, Inc. Delaware
Drexel Heritage Advertising, Inc. Delaware
Drexel Heritage Inspirations, Inc. North Carolina
Hanhill (Great Britain) Limited England
Henredon Furniture Industries, Inc. North Carolina
Henredon Transportation Co. North Carolina
Henry Link Corporation Delaware
Interior Fabric Design, Inc. New York
Intro Europe Inc. North Carolina
La Barge, Inc. Michigan
Lexington Furniture Industries, Inc. North Carolina
LifeStyle Outlet Corp. Delaware
Link-Taylor Corporation Delaware
LFI Receivables Corporation Delaware
LFI Servicing Corporation Delaware
Maitland-Smith, Inc. North Carolina
Maitland-Smith Asia Holdings Limited Vanuatu
Cebu Agency Limited Hong Kong
Design Agency Limited Hong Kong
Maitland-Smith Ltd. Hong Kong
Maitland-Smith Cebu Inc. Philippines
Maitland-Smith Pacific Ltd. Vanuatu
Maitland-Smith Philippines, Inc. Philippines
Perabut Bermutu (L) Bhd. Labuan
PT Maitland-Smith Indonesia Indonesia
Marbro Lamp Company California
Ramm, Son & Crocker Limited England
Ramm, Son & Crocker, Inc. New York
Robert Allen Fabrics, Inc. Delaware
Robert Allen Fabrics (Canada) Ltd. Canada
Robert Allen Fabrics of N.Y., Inc. Delaware
Sunbury Textile Mills, Inc. Delaware
Universal Furniture Limited Delaware
Del Mar Furniture Industries (Singapore) Pte. Ltd. Singapore
H.K.T. (Malaysia) Sdn. Bhd. Malaysia
Hong Kong Teakwood Works Limited Hong Kong
Hong Kong Teakwood Works (Singapore) Pte. Ltd. Singapore
<PAGE>
Jurisdiction of
Incorporation
Name or Organization
---- ---------------
Hong Kong Teakwood Works (Taiwan) Limited Taiwan
Log and Timber Products (Singapore) Pte. Ltd. Singapore
Rigel Enterprises Limited Hong Kong
Shin Shin Wood Products Co. Ltd. (51%) Taiwan
Sterling Home Furnishings Pte. Ltd. Singapore
Sterling Home Furnishings (Taiwan) Ltd. Taiwan
Sterling Home Furnishings (Hong Kong) Ltd. Hong Kong
Syarikat Malaysia Wood Industries Sdn. Bhd. Malaysia
Teakwood Property Development Ltd. Hong Kong
Teakwood (U.K.) Ltd. United Kingdom
Pilliod (U.K.) Limited United Kingdom
Universal Furniture Industries (U.K.) Ltd. United Kingdom
Universal Furniture Industries, Inc. Delaware
Blue Mountain Trucking Corporation Mississippi
Custom Truck Tires, Inc. Mississippi
Universal Furniture Industries (D) GmbH Germany
Universal Furniture Industries (Scandinavia) AB Sweden
Universal Furniture Industries (Japan) Ltd. Japan
Universal Furniture (Taiwan) Co. Ltd. Taiwan
Universal Furniture (Thailand) Ltd. Thailand
Universal Woodfloor (Europe) AB Sweden
Universal Woodfloor (Europe) GmbH Germany
UFL Management Services Pte. Ltd. Singapore
World Wide Furniture Sales, Inc. British Virgin
Islands
Xin Jia Po Huan Mei Furniture Ltd. Hong Kong
Universal Furniture (Tianjin) Co. Ltd. China
Universal Furniture (Guangzhou) Co. Ltd. (85%) China
Universal Furniture (Xian) Co. Ltd. China
Universal Furniture (Fuzhou) Co. Ltd. China
Young-Hinkle Corporation Delaware
Directly owned subsidiaries appear at the left hand margin, subsidiaries are
indicated by multiple indentation and are listed under the names of their
respective parent companies. Unless otherwise indicated, all subsidiaries are
wholly-owned. Certain of these companies may also use tradenames or other
assumed names in the conduct of the their business.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINES SUMMARY INFORMATION EXTRACTED FROM THE UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR PERIODS AUGUST 6, 1996 TO
DECEMBER 31, 1996, JANUARY 1, 1996 TO AUGUST 5, 1996, JANUARY 1, 1995 TO
DECEMBER 31, 1995 AND JANUARY 1, 1994 TO DECEMBER 31, 1994, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 5-MOS 7-MOS YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1995 DEC-31-1994
<PERIOD-END> DEC-31-1996 AUG-05-1996 DEC-31-1995 DEC-31-1994
<CASH> 22,400 0 17,310 24,710
<SECURITIES> 51,120 0 0 0
<RECEIVABLES> 132,890 0 334,420 317,610
<ALLOWANCES> 4,800 0 9,000 7,700
<INVENTORY> 526,300 0 559,940 570,330
<CURRENT-ASSETS> 764,680 0 946,040 952,700
<PP&E> 356,960 0 746,380 703,730
<DEPRECIATION> 7,630 0 262,280 237,330
<TOTAL-ASSETS> 1,190,730 0 1,903,910 1,907,480
<CURRENT-LIABILITIES> 265,130 0 205,150 194,440
<BONDS> 200,000 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 0 0 0 0
<OTHER-SE> 453,360 0 1,621,040 1,633,110
<TOTAL-LIABILITY-AND-EQUITY> 1,190,730 0 1,903,910 1,907,480
<SALES> 857,490 1,147,890 1,992,610 1,897,480
<TOTAL-REVENUES> 857,490 1,147,890 1,992,610 1,897,480
<CGS> 638,140 870,650 1,500,990 1,434,030
<TOTAL-COSTS> 638,140 870,650 1,500,990 1,434,030
<OTHER-EXPENSES> 6,730 3,480 8,260 7,280
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 19,930 52,690 94,830 87,090
<INCOME-PRETAX> 48,110 (1,160) (9,260) (17,720)
<INCOME-TAX> 16,840 6,830 6,690 6,050
<INCOME-CONTINUING> 31,270 (7,990) (16,240) (23,770)
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 31,270 (7,990) (16,240) (23,770)
<EPS-PRIMARY> 0 0 0 0
<EPS-DILUTED> 0 0 0 0
</TABLE>
