Exhibit 10.26
EXECUTION COUNTERPART
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SERVICING AGREEMENT
among
FINANCIAL PACIFIC LEASING, LLC,A
as Servicer,
FINANCIAL PACIFIC FUNDING II, LLC,
as Borrower,
▇▇▇▇▇ FARGO BANK MINNESOTA, NATIONAL ASSOCIATION,
as Collateral Agent and as Backup Servicer,
and
WESTSIDE FUNDING CORPORATION,
as Lender
Dated as of December 14, 2001
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TABLE OF CONTENTS
Page
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ARTICLE I
Definitions
ARTICLE II
The Servicer
Section 2.01. Representations and Warranties of Servicer................................................ 2
Section 2.02. Indemnities of Servicer................................................................... 3
Section 2.03. Merger or Consolidation of, or Assumption of the Obligations of, Servicer or
Backup Servicer........................................................................... 4
Section 2.04. Servicer and Backup Servicer Not to Resign................................................ 5
Section 2.05. Representations and Warranties of Backup Servicer......................................... 6
ARTICLE III
Administration and Servicing of Contracts
Section 3.01. Duties of Servicer........................................................................ 6
Section 3.02. Collection and Allocation of Contract Payments............................................ 7
Section 3.03. Realization Upon Contracts................................................................ 7
Section 3.04. Physical Damage Insurance; Other Insurance................................................ 7
Section 3.05. Maintenance of Security Interests in Equipment............................................ 8
Section 3.06. Additional Covenants of Servicer.......................................................... 8
Section 3.07. Purchase of Contracts Upon Breach......................................................... 8
Section 3.08. Servicing Fee............................................................................. 9
Section 3.09. Servicer's Certificate.................................................................... 9
Section 3.10. Annual Statement as to Compliance; Notice of Default...................................... 9
Section 3.11. Independent Certified Public Accountant's Report.......................................... 10
Section 3.12. Servicer Expenses......................................................................... 10
Section 3.13. Treatment of Borrower..................................................................... 11
Section 3.14. Access to Records, etc.................................................................... 11
Section 3.15. Data Report............................................................................... 11
Section 3.16. Employee Dishonesty Policy................................................................ 12
Section 3.17. Sub-Servicer.............................................................................. 12
Section 3.18. Amendment to Guidelines................................................................... 12
ARTICLE IV
accounts; collections
Section 4.01. Accounts.................................................................................. 13
Section 4.02. Collections............................................................................... 13
-i- Servicing Agreement
Section 4.03. Application of Collections................................................................ 14
Section 4.04. Servicer Advances......................................................................... 14
ARTICLE V
TERMINATION; TERM
Section 5.01. Termination of Servicer................................................................... 14
Section 5.02. Appointment of Successor Servicer......................................................... 15
Section 5.03. Servicer's Term........................................................................... 17
Section 5.04. Back-up Servicer as Servicer.............................................................. 17
ARTICLE VI
Miscellaneous Provisions
Section 6.01. Termination............................................................................... 17
Section 6.02. Amendments................................................................................ 18
Section 6.03. Governing Law............................................................................. 18
Section 6.04. Notices................................................................................... 18
Section 6.05. Severability of Provisions................................................................ 19
Section 6.06. Binding Effect............................................................................ 19
Section 6.07. Headings and Captions..................................................................... 19
Section 6.08. Legal Holidays............................................................................ 19
Section 6.09. Security for the Loan..................................................................... 19
Section 6.10. No Servicing Assignment................................................................... 19
Section 6.11. Third-Party Beneficiaries................................................................. 19
Section 6.12. SUBMISSION TO JURISDICTION; WAIVERS....................................................... 19
Section 6.13. WAIVER OF JURY TRIAL...................................................................... 20
Section 6.14. No Proceedings............................................................................ 20
Section 6.15. Counterparts.............................................................................. 20
Signature Page 28
-ii- Servicing Agreement
SERVICING AGREEMENT
This SERVICING AGREEMENT ("Agreement"), dated as of December 14, 2001,
is by and among Financial Pacific Leasing, LLC, a Washington limited liability
company, as Servicer ("FinPac" or the "Servicer"), Financial Pacific Funding II,
LLC, a Delaware limited liability company, as Borrower (the "Borrower"), ▇▇▇▇▇
Fargo Bank Minnesota, National Association, as Collateral Agent (in such
capacity, the "Collateral Agent") and as Backup Servicer (in such capacity, the
"Backup Servicer"), and Westside Funding Corporation, a Delaware corporation, as
Lender (the "Lender").
PRELIMINARY STATEMENT
The Borrower has entered into a Warehouse and Security Agreement, dated
as of December 14, 2001 (as amended, supplemented or otherwise modified from
time to time, the "Loan Agreement"), with the Collateral Agent, the Securities
Intermediary, Financial Pacific Company, solely for the purpose of Section 7.05
thereof, the Lender and the Servicer, pursuant to which the Lender, subject to
the terms and conditions of the Loan Agreement, may from time to time, make
Advances to the Borrower.
The Borrower and FinPac have entered into an Acquisition Agreement,
dated as of December 14, 2001 (as amended, supplemented or otherwise modified
from time to time, the "Acquisition Agreement"), providing for, among other
things, the sale, from time to time, by FinPac to the Borrower of all of
FinPac's right, title and interest in and to certain Collateral which the
Borrower is and will be pledging to the Collateral Agent, for the benefit of the
Lender and the Hedge Counterparty pursuant to the Loan Agreement.
In addition, the Borrower is pledging to the Collateral Agent, among
other things, all of the Borrower's rights derived under this Agreement and the
Acquisition Agreement, and the Servicer agrees that all covenants and agreements
made by the Servicer herein with respect to the Collateral shall also be for the
benefit of the Lender, the Hedge Counterparty and the Collateral Agent. For
their services under this Agreement, the Servicer, the Backup Servicer and the
Collateral Agent will receive the compensation described herein or in the Loan
Agreement.
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, capitalized terms used and not
otherwise defined herein shall have the meanings set forth in Appendix A to the
Loan Agreement. Any and all terms used in this Agreement which are defined in
the UCC shall be construed and defined in accordance with the meaning and
definition ascribed to such terms under the UCC, unless otherwise defined in
Appendix A to the Loan Agreement.
Servicing Agreement
ARTICLE II
THE SERVICER
Section 2.01. Representations and Warranties of Servicer. The initial
Servicer makes the following representations and warranties to the Notice
Parties, on which representations and warranties the Lender shall rely in making
the Advances. The representations and warranties speak as of the execution and
delivery of this Agreement, the Closing Date and each Funding Date (unless a
different date is specified) and shall survive the date hereof and thereof:
(a) Organization and Good Standing. The Servicer has been duly
organized and is validly existing as a limited liability company in good
standing under the laws of the State of Washington, with power and authority to
own its properties and to conduct its business as such properties shall be
currently owned and such business is presently conducted, and had at all
relevant times, and shall have, power, authority, and legal right to service the
Contracts as provided herein.
(b) Due Qualification. The Servicer is duly qualified to do business as
a foreign limited liability company in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which its ownership or
lease of property or the conduct of its business (including the servicing of the
Contracts as required by this Agreement) shall require such qualifications,
licenses and approvals and where the failure to so qualify (or to obtain such
licenses or approvals) could reasonably be expected to result in a Material
Adverse Effect.
(c) Power and Authority. The Servicer has the power and authority to
execute and deliver this Agreement and to carry out its terms; and the
execution, delivery, and performance of this Agreement has been duly authorized
by the Servicer by all necessary action.
(d) Binding Obligation. This Agreement and each other Loan Document to
which the Servicer is a party constitutes a legal, valid and binding obligation
of the Servicer enforceable in accordance with its terms except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforceability of creditors'
rights generally, and by general equitable principles.
(e) No Violation. The execution, delivery and performance by the
Servicer of this Agreement and the consummation of the transactions contemplated
hereby and the fulfillment of the terms hereof do not (A) conflict with, result
in any material breach of any of the terms and provisions of, nor constitute
(with or without notice or lapse of time) a default under, the certificate of
formation or operating agreement of the Servicer; (B) conflict with, result in
any material breach of any of the terms and provisions of, or constitute a
default under, any indenture, agreement, mortgage, deed of trust, or other
instrument to which the Servicer is a party or by which it is bound or any of
its properties are subject; (C) result in the creation or imposition of any Lien
upon any of its properties pursuant to the terms of any indenture, agreement,
mortgage, deed of trust, or other instrument; or (D) violate any law, order,
rule, or regulation applicable to the Servicer of any court or of any federal or
state regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over the
2 Servicing Agreement
Servicer or its properties, which, in the case of clause (D), could reasonably
be expected to result in a Material Adverse Effect.
(f) No Proceedings. Except as set forth on Exhibit P to the Loan
Agreement, there are no proceedings or investigations pending, or to the
Servicer's best knowledge, threatened, before any court, regulatory body,
administrative agency, or other governmental instrumentality having jurisdiction
over the Servicer or its properties: (A) asserting the invalidity of this
Agreement or the other Loan Documents, (B) seeking to prevent the consummation
of any of the transactions contemplated by this Agreement or the other Loan
Documents, or (C) which, if adversely determined, would be reasonably likely to
have a Material Adverse Effect.
(g) Approvals. All approvals, authorizations, consents, orders or other
actions of any person, corporation or other organization, or of any court,
governmental agency or body or official, required to be obtained by the Servicer
in connection with the execution and delivery of this Agreement have been or
will be taken or obtained, and will be in full force and effect, on or prior to
the Closing Date where the failure to take or obtain the same could be
reasonably likely to have a Material Adverse Effect.
(h) Financial Position. (A) The consolidated balance sheets of
Financial Pacific Company as at December 31, 2000, and the related consolidating
statements of income and shareholders' equity of Financial Pacific Company and
its consolidated subsidiaries for the fiscal year then ended, certified by
Deloitte & Touche LLP, independent certified public accountants, and the
unaudited consolidating balance sheets of the initial Servicer and its
consolidated subsidiaries as at March 31, 2001, June 30, 2001, and September 30,
2001 and the related consolidating statements of income and shareholders' equity
of Financial Pacific Company and its consolidated subsidiaries for the fiscal
quarters then ended, copies of which have been furnished to the Lender, fairly
present in all material respects the consolidated financial position of
Financial Pacific Company and its consolidated subsidiaries as at such dates and
the consolidated results of the operations of Financial Pacific Company and its
consolidated subsidiaries for the periods ended on such dates, all in accordance
with GAAP consistently applied, and (B) since December 31, 2000 there has been
no material adverse change in any such financial position, business or
operations.
(i) Accurate Reports. No Servicer's Certificate, Data Report or other
information, exhibit, financial statement, document, book, record or report
furnished or to be furnished, in each case in writing, by or on behalf of the
Servicer to the Lender, pursuant to this Agreement or any other Loan Document
was inaccurate in any material respect as of the date it was dated or as of the
date so furnished, or contained any material misstatement of fact or omitted to
state a material fact necessary to make the statements contained therein not
materially misleading in light of the circumstances made or presented.
(j) Servicer's Records. The Borrower is identified as "Lessor No. 5,"
in the records, software and reports of the Servicer in accordance with Section
II.1 of the Lock-Box Agreement.
Section 2.02. Indemnities of Servicer.
3 Servicing Agreement
(a) General Indemnity. Without limiting any other rights which any such
Person may have hereunder, under any other Loan Document or under applicable
law, the Servicer hereby agrees to indemnify each Indemnified Party, forthwith
on demand, from and against any and all liabilities, losses, damages, judgments,
costs and expenses of any kind awarded against or incurred by any of them
arising out of or resulting from (i) any representation or warranty made by the
Servicer under or in connection with any Loan Document, any Servicer's
Certificate or Data Report or any other written information or report delivered
by or on behalf of the Servicer pursuant hereto or thereto, which shall have
been false, incorrect or misleading in any material respect when made or deemed
made, or (ii) the failure by the Servicer to comply with any applicable law,
rule or regulation with respect to any Contracts or the related Collateral, or
(iii) the failure of the Servicer to perform its duties or obligations in
accordance with this Agreement or any other Loan Document, excluding, however,
(a) liabilities, losses, damages, judgments, costs and expenses to the extent
resulting from gross negligence or willful misconduct on the part of such
Indemnified Party, (b) recourse for Defaulted Contracts and (c) any tax upon or
measured by net income of any Indemnified Party.
(b) Collateral Agent. The initial Servicer shall indemnify, defend, and
hold harmless the Collateral Agent from and against all reasonable costs,
reasonable expenses, losses, claims, damages, and liabilities arising out of or
incurred in connection with the acceptance or performance of its duties
contained in this Agreement and the other Loan Documents except to the extent
that such loss, liability, claim, damage, or expense shall have been incurred by
reason of the Collateral Agent's willful misfeasance or gross negligence.
(c) Termination or Expiration of Term. For purposes of this Section, in
the event of the termination of the rights and obligations of a Servicer (or any
successor thereto pursuant to Section 2.03) as Servicer pursuant to Section 5.01
of this Agreement or Section 9.01 of the Loan Agreement, a resignation by such
Servicer pursuant to this Agreement, or the expiration of the Servicer's term
pursuant to Section 5.03 of this Agreement, such Servicer shall be deemed to be
the Servicer pending the assumption by a successor Servicer of the Servicer's
duties pursuant to Section 5.02 of this Agreement. The provisions of this
Section 2.02(c) shall in no way affect the survival pursuant to Section 2.02(d)
of the indemnification by the Servicer provided under this Section 2.02.
(d) Survival. The provisions of this Section 2.02 shall survive the
termination of this Agreement and the other Loan Documents, and the resignation
or removal of the Collateral Agent, and shall include reasonable fees and
expenses of outside counsel and expenses of litigation.
Section 2.03. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer or Backup Servicer. (a) The initial Servicer shall not
merge or consolidate with or into, or (except for transfers of Contracts and
related assets in the ordinary course of its business), in one transaction or a
series of transactions, sell, assign or otherwise transfer all or substantially
all of its assets or controlling membership interests to, any other Person,
unless (i) either (A) such transaction is a merger or consolidation and the
Servicer is the surviving limited liability company or (B) on or prior to the
effectiveness of such transaction, the surviving entity or transferee shall
execute an agreement of assumption to perform every obligation of the Servicer
hereunder, which agreement shall be satisfactory in form and substance to the
Lender, (ii)
4 Servicing Agreement
immediately after giving effect to such transaction, no Default shall have
occurred and be continuing or would reasonably be expected to occur as a result
of such transaction, (iii) the Servicer shall have delivered to the Lender an
Officers' Certificate stating that such consolidation, merger, sale, assignment
or transfer and such agreement of assumption comply with this Section 2.03 and
that all conditions precedent provided for in this Agreement relating to such
transaction have been complied with and (iv) the Servicer shall have delivered
to the Lender an Opinion of Counsel stating that such agreement of assumption is
legal, valid, binding and enforceable in accordance with its terms and either
(A) stating that, in the opinion of such counsel, all financing statements and
continuation statements and amendments thereto have been executed and filed and
all other actions have been taken which are necessary fully to preserve and
continue the validity, perfection and priority of the Collateral Agent's
interest in the Contracts and reciting the details of such filings and other
actions, or (B) stating that, in the opinion of such counsel, no such filing or
other action shall be necessary to preserve and continue the validity,
perfection and priority of such interest. Nothing in this Section 2.03 shall be
deemed to release the Servicer from any of its obligations as such.
(b) Any Person (i) into which the Backup Servicer may be merged or
consolidated, (ii) which may result from any merger or consolidation to which
the Backup Servicer shall be a party, or (iii) which may succeed to the
properties and assets of the Backup Servicer substantially as a whole, shall be
the successor to the Backup Servicer under this Agreement without further act on
the part of any of the parties to this Agreement; provided, however, that
nothing herein shall be deemed to release the Backup Servicer from any
obligation.
Section 2.04. Servicer and Backup Servicer Not to Resign. Subject to
the provisions of Section 2.03, neither the Servicer nor the Backup Servicer may
resign from the obligations and duties hereby imposed on it as Servicer or
Backup Servicer, as the case may be, under this Agreement except upon
determination that by reason of a change in legal requirements the performance
of its duties under this Agreement would cause it to be in violation of such
legal requirements in a manner which would result in a material adverse effect
on the Servicer or the Backup Servicer, as the case may be, and the Lender does
not elect to waive the obligations of the Servicer or the Backup Servicer, as
the case may be, to perform the duties which render it legally unable to act or
does not elect to delegate those duties to another Person. Notice of resignation
of the Servicer or the Backup Servicer, as the case may be, as a result of a
determination as set forth in the immediately preceding sentence shall be
communicated to the Notice Parties at the earliest practicable time (and, if
such communication is not in writing, shall be confirmed in writing at the
earliest practicable time) and any such determination shall be evidenced by an
Opinion of Counsel to such effect delivered to and reasonably satisfactory to
the Lender concurrently with or promptly after such notice. No resignation of
the Servicer shall become effective until a successor servicer acceptable to the
Lender shall have assumed the responsibilities and obligations of such Servicer
in accordance with Section 5.02 of this Agreement. No resignation of the Backup
Servicer shall become effective until an entity reasonably acceptable to the
Lender shall have assumed the responsibilities and obligations of the Backup
Servicer; provided, however, that if no such entity shall have assumed such
responsibilities and obligations of the Backup Servicer within 30 days of the
resignation of the Backup Servicer, the Backup Servicer may petition a court of
competent jurisdiction for the appointment of a successor to the Backup Servicer
acceptable to the Lender.
5 Servicing Agreement
Section 2.05. Representations and Warranties of Backup Servicer. The
Backup Servicer makes the following representations and warranties on which the
Borrower and the other Notice Parties shall rely:
(i) The Backup Servicer is a national banking association
duly organized, validly existing and in good standing under the laws of
the United States.
(ii) The Backup Servicer has full corporate power,
authority and legal right to execute, deliver and perform this
Agreement and has taken all necessary action to authorize the
execution, delivery and performance by it of this Agreement.
(iii) This Agreement has been duly executed and delivered
by the Backup Servicer and constitutes a legal, valid and binding
obligation of the Backup Servicer in accordance with its terms.
ARTICLE III
ADMINISTRATION AND SERVICING OF CONTRACTS
Section 3.01. Duties of Servicer. The Servicer (on behalf of the
Borrower and the Lender) shall manage, service, administer and make collections
on the Contracts with reasonable care and diligence in accordance with
applicable laws, rules and regulations and with the Collection Guidelines, using
that degree of skill and attention that the Servicer exercises with respect to
all comparable equipment leases that it services for itself or others. The
Servicer's duties shall include, without limitation, collection and posting of
all payments, responding to inquiries of Customers on such Contracts,
investigating delinquencies, sending payment invoices to Customers, reporting
tax information to Customers, accounting for collections, furnishing monthly and
annual statements to the Lender with respect to distributions, and making
Servicer Advances, if required, pursuant to Section 4.04. Subject to the
foregoing provisions of this Section 3.01, the Servicer shall follow its
currently employed standards, policies and procedures or such other standards,
policies and procedures as the Servicer employs in the future consistent with
the business practice of other servicers in the industry servicing similar
Contracts, in performing its duties as Servicer. Without limiting the generality
of the foregoing, and subject to the servicing standards set forth in this
Agreement, the Servicer is authorized and empowered by the Lender to execute and
deliver, on behalf of itself and the Lender or either of them, any and all
instruments of satisfaction or cancellation, or partial or full release or
discharge, and all other comparable instruments, with respect to such Contracts
or to the Equipment securing, or otherwise subject to, such Contracts. If the
Servicer shall commence a legal proceeding to enforce a Contract, the Borrower
shall thereupon be deemed to have automatically assigned, solely for the purpose
of collection, such Contract to the Servicer. If in any enforcement suit or
legal proceeding it shall be held that the Servicer may not enforce a Contract
on the ground that it shall not be a real party in interest or a holder entitled
to enforce such Contract, unless the Lender shall waive the enforcement of such
Contract by the Servicer, then the Borrower shall, at the Servicer's expense and
direction, and subject to obtaining such indemnity as the Lender (or the
Borrower, as applicable) may reasonably require, take steps to enforce such
Contract, including bringing suit in its own name. The Servicer shall prepare
and furnish, and the Borrower shall execute, any powers of attorney and other
documents reasonably necessary or
6 Servicing Agreement
appropriate from time to time to enable the Servicer to carry out its servicing
and administrative duties hereunder.
Section 3.02. Collection and Allocation of Contract Payments. The
Servicer shall make reasonable efforts to collect all payments called for under
the terms and provisions of the Contracts as and when the same shall become due
and, subject to Section 3.01, shall follow such collection procedures as it
follows with respect to all comparable equipment leases that it services for
itself or others. The Servicer will be responsible for identifying payments
received from the Customers and (i) transferring such payments to the Lock-Box
Account within two Business Days of receipt or (ii) if such payments were
received in a post office box subject to a Lock-Box Agreement, causing the
related Lock-Box Bank to transfer such payments into a related Lock-Box Account
that is subject to a Lock-Box Agreement as described in Section 4.02. The
Servicer, for so long as FinPac is the Servicer, may grant extensions or other
modifications on a Contract; provided that such extensions or other
modifications are consistent with the Collection Guidelines. If the Servicer is
not FinPac, the Servicer may not make any extension or other modification on a
Contract without the prior written consent of the Lender. The Servicer may in
its discretion waive any late payment charge or any other fees that may be
collected in the ordinary course of servicing a Contract, consistent with the
Collection Guidelines. The Servicer shall not agree to any reduction of the
interest rate on any Contract (except as required by law if the related Customer
is the subject of an Event of Bankruptcy) or of the amount of any Scheduled
Payment on Contracts, or reduce the Implicit Principal Balance of any Contract
(except for actual payments of principal received), unless such modifications
are consistent with the Collection Guidelines. Notwithstanding anything to the
contrary contained in this Section 3.02, the average of the Modification Ratios
for the three most recently ended Collection Periods shall not exceed 0.35%.
Section 3.03. Realization Upon Contracts. The Servicer (on behalf of
the Borrower and the Lender (to the extent provided herein)) shall use all
reasonable efforts, consistent with its customary servicing procedures and to
the extent permissible in accordance with the Contracts and under applicable
law, to repossess or otherwise convert the ownership of the Equipment securing,
or that is the subject of, any Contract that is in default as to which the
Servicer shall have determined eventual payment in full is unlikely. In
connection therewith, the Servicer shall follow such customary and usual
practices and procedures as it shall deem necessary or advisable in its
servicing of equipment lease contracts that are in default, which may include
selling the Equipment at public or private sale. The foregoing shall be subject
to the provision that, in any case in which the Equipment shall have suffered
damage, the Servicer shall not expend funds in connection with the repair or the
repossession of such Equipment unless it shall determine in its reasonable
discretion that such repair and/or repossession will increase the proceeds
ultimately recoverable with respect to such Contract by an amount greater than
the amount of such expenses. To the extent provided in this Agreement, the
Servicer shall be entitled to net its reasonable and customary costs and
expenses incurred in connection with the repossession and disposition of
Equipment from the liquidation proceeds related thereto.
Section 3.04. Physical Damage Insurance; Other Insurance. (a) The
initial Servicer, in accordance with its customary servicing procedures, shall
verify that each item of Equipment continues to be covered by a policy of
insurance insuring against loss and damage due to fire,
7 Servicing Agreement
theft, collision and, in the case of Equipment that is a titled vehicle, against
other risks generally covered by liability coverage.
(b) To the extent applicable, the Servicer shall not take any action
which would result in noncoverage under any of the insurance policies referred
to in Section 3.04(a) which, but for the actions of the Servicer, would have
been covered thereunder. The Servicer, on behalf of the Lender, shall take all
such reasonable action as shall be necessary to permit recovery under any of the
foregoing insurance policies. Any amounts collected by the Servicer under any of
the foregoing insurance policies, shall be deposited in the Lock-Box Account
pursuant to Section 3.02. The parties hereto acknowledge that the Servicer shall
not be required to force place any insurance coverage. In addition to such
insurance maintained by the Customers with respect to the Equipment, the initial
Servicer shall maintain, among other policies, a general liability insurance
policy in the aggregate amount of $2,000,000 and an excess liability insurance
policy in umbrella form in the aggregate amount of $4,000,000 for a total of
$6,000,000 of liability insurance. Each of such policies shall be maintained by
the initial Servicer in full force and effect and shall cover all Equipment. All
premiums in respect of such policies shall be paid by the initial Servicer from
its own funds. The Collateral Agent, the Secured Parties, and the Borrower shall
be named as additional insureds on such liability policies.
Section 3.05. Maintenance of Security Interests in Equipment. The
Servicer and the Borrower shall take such steps as are required by applicable
law to maintain perfection of (i) the security interest created by each Contract
in the related Equipment and (ii) the interest of the Collateral Agent, for the
benefit of the Secured Parties, in the Collateral created by the Loan Agreement,
including but not limited to obtaining the execution by the Customers and the
recording, registering, filing, re-recording, re-registering and refiling of all
security agreements, financing statements and continuation statements or
instruments as are necessary to maintain the security interest granted by
Customers under the respective Contracts, FinPac under the Acquisition Agreement
and the Borrower under the Loan Agreement. The Collateral Agent, the Lender and
the Borrower hereby authorize the Servicer to take such steps as are necessary
to re-perfect or continue the perfection of such security interest of FinPac on
behalf of the Collateral Agent and the Secured Parties in the event of the
relocation of a Customer or for any other reason.
Section 3.06. Additional Covenants of Servicer. The Servicer shall not
release the Equipment securing any Contract from the security interest granted
by such Contract in whole or in part except in the event of payment in full by
the Customer thereunder or repossession, nor shall the Servicer impair the
rights of the Collateral Agent, for the benefit of the Secured Parties, in such
Contracts, nor shall the Servicer amend a Contract, except that extensions or
other modifications may be granted in accordance with Section 3.02.
Section 3.07. Purchase of Contracts Upon Breach. The Servicer or the
Collateral Agent shall inform the other such party and the Notice Parties
promptly, in writing, upon the discovery (or, in the case of the Collateral
Agent, upon the actual knowledge of any Collateral Agent Officer) of any
material breach by the Servicer of its obligations under Section 3.04, 3.05 or
3.06. With respect to breaches pursuant to Section 3.04, 3.05 or 3.06, unless
such breach shall have been cured by the last day of the first Collection Period
commencing after the Servicer's receipt of written notice of such breach or the
Servicer's actual knowledge of such breach,
8 Servicing Agreement
whichever is earlier (or, at the Servicer's election, the last day of the
current Collection Period), the initial Servicer shall purchase from the
Borrower any Contract with respect to which the interest of any Secured Party is
materially and adversely affected by such breach on such last day of such first
Collection Period. In consideration of the purchase of a Contract pursuant to
this Section, the initial Servicer shall remit the Release Price in the manner
specified in Section 3.02. For purposes of this Section 3.07, the Release Price
with respect to a Contract shall consist in part of a release by the Servicer of
all rights of reimbursement with respect to Outstanding Servicer Advances on the
Contract. If the initial Servicer complies in a timely manner with its
repurchase obligation pursuant to this Section 3.07, then notwithstanding
anything to the contrary in this Agreement or any other Loan Document, the sole
remedy of the Collateral Agent or the Lender with respect to a breach pursuant
to Section 3.04, 3.05 or 3.06 shall be to require the initial Servicer to
repurchase Contracts pursuant to this Section 3.07.
Section 3.08. Servicing Fee. The Servicing Fee for a Payment Date shall
equal the product of (i) one-twelfth of the Servicing Rate and (ii) the
Aggregate Implicit Principal Balance of all Contracts as of the opening of
business on the first day of the related Collection Period. The Servicing Fee
shall also include all late fees, prepayment charges and other administrative
fees or similar charges allowed by applicable law with respect to Contracts
collected (from whatever source) by the Servicer on the Contracts.
Section 3.09. Servicer's Certificate. On each Determination Date prior
to 2:00 p.m. New York, New York time, the Servicer shall deliver to the Notice
Parties and the Borrower a Servicer's Certificate containing all information
necessary to make the distributions pursuant to Section 3.03(b) of the Loan
Agreement (including information regarding all releases and substitutions of
Contracts, and the amount of all Servicer Advances, for the Collection Period
preceding the date of such Servicer's Certificate) and the other information
specified in Exhibit 3.09. Contracts to be purchased by the Servicer or to be
purchased by FinPac shall be identified by the Servicer by account number and by
Customer's name with respect to such Contract (as specified in Schedule I to the
relevant Assignment). No later than 30 calendar days following the delivery of
the second Servicer's Certificate delivered hereunder, the Servicer shall
provide to the Notice Parties a confirmation of the first and second Servicer's
Certificates from independent auditors reasonably acceptable to the Lender.
Section 3.10. Annual Statement as to Compliance; Notice of Default. (a)
The initial Servicer shall deliver to the Notice Parties, on or before April 30
of each year beginning April 30, 2003, an Officer's Certificate, dated as of
December 31 of the preceding fiscal year, stating that (i) a review of the
activities of the Servicer during the preceding 12-month period and of its
performance under this Agreement has been made under the supervision of the
officer signing such Officer's Certificate and (ii) to the best of such
officer's knowledge, based on such review, the Servicer has fulfilled all its
obligations under this Agreement in all material respects throughout such year,
or, if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof.
(b) The Servicer shall deliver to the Notice Parties, promptly after
having obtained knowledge thereof, but in no event later than five (5) Business
Days after obtaining such knowledge, written notice in an Officer's Certificate
of any Default, Funding Termination Event or an Event of Default under Section
8.01 of the Loan Agreement.
9 Servicing Agreement
Section 3.11. Independent Certified Public Accountant's Report. (a) The
initial Servicer shall cause a firm of nationally-recognized certified public
accountants (which shall be one of the "Big 5" accounting firms), who may also
render other services to the initial Servicer or to the Borrower, to deliver to
the Notice Parties on or before April 30 of each year as of December 31 of the
preceding fiscal year, beginning April 30, 2002, (1) a report addressed to the
Board of Directors of Financial Pacific Company, to the effect that such firm
has examined the consolidated financial statements of Financial Pacific Company,
which financial statements include consolidating schedules related to the
initial Servicer, and issued its report therefor and that such examination was
made in accordance with generally accepted auditing standards (except as
otherwise noted therein), and accordingly included such tests of the accounting
records and such other auditing procedures as such firm considered necessary in
the circumstances; and (2) a report verifying the information, including the
accuracy of the calculations, on the Servicer's Certificates delivered by the
initial Servicer during the prior year and tying such information to the initial
Servicer's books and records. The reports described in clauses (1) and (2) above
shall also indicate that the firm is independent of the initial Servicer within
the meaning of the Code of Professional Ethics of the American Institute of
Certified Public Accountants.
(b) Unless otherwise consented to by the Lender: the initial Servicer
shall cause a firm of nationally-recognized certified public accountants (which
shall be one of the "Big 5" accounting firms), who may also render other
services to the initial Servicer or to the Borrower, to deliver to the Notice
Parties on or before April 30 and October 31 of each year, beginning April 30,
2002, a report addressed to the Lender, to the effect that such firm has
performed a full operational review of the Servicer for the six calendar month
period ending March 31 or September 30, as applicable, pursuant to a scope
acceptable to the Lender, and issued its report therefor and that such review
was made in accordance with generally accepted auditing standards (except as
otherwise noted therein), and accordingly included such tests of the accounting
records and such other auditing procedures as such firm considered necessary in
the circumstances. The reports described in the immediately preceding sentence
shall also indicate that the firm is independent of the initial Servicer within
the meaning of the Code of Professional Ethics of the American Institute of
Certified Public Accountants.
(c) In the event such independent public accountants require the
Collateral Agent to agree to the procedures to be performed by such firm in any
of the reports required to be prepared pursuant to this Section 3.11, the
Servicer shall direct the Collateral Agent in writing to so agree; it being
understood and agreed that the Collateral Agent will deliver such letter of
agreement in conclusive reliance upon the direction of the Servicer, and the
Collateral Agent has not made any independent inquiry or investigation as to,
and shall have no obligation or liability in respect of, the sufficiency,
validity or correctness of such procedures.
Section 3.12. Servicer Expenses. The initial Servicer shall be required
to pay all expenses incurred by it in connection with its activities hereunder
including fees and disbursements of independent accountants (including but not
limited to expenses associated with the reports delivered pursuant to Section
3.11 of this Agreement), the Collateral Agent and the Backup Servicer (to the
extent that the fees of the Collateral Agent and Backup Servicer shall not be
fully paid from distributions made pursuant to Section 3.03(b) of the Loan
Agreement), taxes
10 Servicing Agreement
imposed on the Servicer, and expenses incurred in connection with distributions
and reports made by the Servicer to the Notice Parties.
Section 3.13. Treatment of Borrower. The Servicer shall identify the
Borrower as "Lessor No. 5" in the records, software and reports of the Servicer
in accordance with Section II.1 of the Lock-Box Agreement.
Section 3.14. Access to Records, etc. (i) At any time and from time to
time during regular business hours, and upon at least two (2) Business Days
prior written notice (unless a Default or an Event of Default shall have
occurred and be continuing, in which case no notice shall be required), the
Servicer shall permit the Borrower, each Notice Party and/or their agents or
representatives, (A) to examine and make copies of and abstracts from all books,
records and documents (including, without limitation, computer tapes and disks)
in the possession or under the control of the Servicer relating to Contracts,
including, without limitation, related contracts and other agreements with
respect to the Collateral and (B) to visit the offices and properties of the
Servicer for the purpose of examining such materials described in clause (i)(A)
next above, and to discuss matters relating to Contracts or the Servicer's
performance hereunder or under any other Loan Document with any of the officers
or employees of such party having knowledge of such matters, and (ii) without
limiting the provisions of clause (i) next above, from time to time on request
of any Notice Party or the Borrower, permit certified public accountants or
other auditors acceptable to such Notice Party or the Borrower to conduct a
review of such party's books and records with respect to the Contracts and/or
the related Collateral.
Section 3.15. Data Report. On each Determination Date, the Servicer
will transmit or deliver to the Notice Parties a data report in the form of
magnetic tape or diskette or computer modem transmission, in a format reasonably
acceptable to the Notice Parties, containing such information as the Notice
Parties may reasonably require with respect to the Contracts as of the close of
business on the last day of the preceding Collection Period, including without
limitation the information necessary for preparation of the Servicer's
Certificate (a "Data Report"). The Servicer shall also transmit to the Notice
Parties a Data Report concurrently with the delivery of any Notice of Borrowing
and Pledge, containing information with respect to any new Contracts to be added
to the Collateral on or before the Funding Date and the Contracts included in
the Collateral after giving effect to such Advance. The Backup Servicer shall
verify that each Data Report is in a readable and usable form and covers all
information necessary to service the Contracts, including, but not limited to,
Aggregate Implicit Principal Balance of the Contracts, Available Funds,
Delinquent Contracts, Defaulted Contracts, Recoveries, prepayments and
bankruptcies. The Backup Servicer shall use each such monthly Data Report to
confirm that the Servicer's Certificate delivered by the Servicer for the
related Collection Period is correct with respect to the following information:
beginning and ending Aggregate Implicit Balance of the Contracts; beginning and
ending Total Outstanding Advances; the Implicit Principal Balance of Contracts
that are 31-60, 61-90 and 91 or more days delinquent; the 31 to 60 Day
Delinquency Ratio; the 61 to 90 Day Delinquency Ratio; the NPA Ratio; the sum of
the Implicit Principal Balance of Defaulted Contracts for the related Collection
Period; the Annualized Charge Off Ratio; the Borrowing Base; the Borrowing Base
Deficiency, if any; and confirmation of concentrations by Customer, broker, type
of Equipment, FinPac Custom Score and geographic territory as of the end of the
related Collection Period. The Backup Servicer shall notify the Servicer and the
Notice Parties of any material discrepancies in connection with such
verification
11 Servicing Agreement
and confirmation on or before the third Business Day following the applicable
Determination Date. The Backup Servicer shall provide, before the end of the
related calendar month, written certification to the Notice Parties that the
information confirmed pursuant to the second preceding sentence above appears
complete and correct (except with respect to any discrepancies described above).
In the event that the Backup Servicer reports any material discrepancies, the
Servicer and the Backup Servicer shall attempt to reconcile such discrepancies
prior to the Business Day prior to the related Payment Date, but in the absence
of a reconciliation, the Servicer's Certificate shall control for the purpose of
calculations and distributions with respect to the related Payment Date. In the
event that the Backup Servicer and the Servicer are unable to reconcile
discrepancies with respect to a Servicer's Certificate by the related Payment
Date, the Servicer shall cause a firm of nationally-recognized independent
certified public accountants acceptable to the Lender, at the Servicer's
expense, to audit the Servicer's Certificate and, prior to the fifth calendar
day of the following month, reconcile the discrepancies. The effect, if any, of
such reconciliation shall be reflected in the Servicer's Certificate for such
next succeeding Determination Date. Other than the duties specifically set forth
in this Agreement, the Backup Servicer shall have no obligations hereunder,
including, without limitation, to supervise, verify, monitor or administer the
performance of the Servicer. The Backup Servicer shall have no liability for any
actions taken or omitted by the Servicer.
Section 3.16. Employee Dishonesty Policy. The Servicer shall maintain
such insurance policy as it has in place as of the Closing Date that insures
against employee dishonesty, and such policy shall at all times provide coverage
in an amount not less than $3,000,000.
Section 3.17. Sub-Servicer. With the prior written consent of the
Lender, the Servicer may appoint any of its Affiliates as sub-servicer with
respect to all or part of the Collateral, provided that the Servicer shall
remain responsible for the performance of the Servicer's duties hereunder and
that following the occurrence of an Event of Default, such sub-servicing
agreement shall, if the Lender so requests, be terminated. The Backup Servicer
may sub-contract its duties hereunder in its role as Backup Servicer or if the
Backup Servicer becomes successor Servicer.
Section 3.18. Amendment to Guidelines. The initial Servicer may (x)
make any change in the character of its business, (y) amend the Underwriting
Guidelines and/or (z) amend the Collection Guidelines in accordance with, and
only in accordance with, the following procedure:
(i) The initial Servicer shall deliver to the Lender
written notice of any proposed change or amendment; provided that such
notice shall meet the requirements set forth in clause (v) below;
(ii) the Lender shall have ten (10) Business Days
following the date of its receipt of such written notice to reject such
proposed change or amendment;
(iii) such proposed change or amendment shall not be
effective prior to the expiration of the latest ten-Business-Day period
specified in clause (ii) above;
(iv) such proposed change or amendment shall become
effective at the expiration of the latest ten-Business-Day period
specified in clause (ii) above unless the
12 Servicing Agreement
Lender shall have delivered to the initial Servicer a written objection
to such proposed change or amendment prior to the expiration of such
ten-Business-Day period; and
(v) in order for the written notice specified in clause
(i) above to be valid, such notice must contain (A) a covenant to the
effect that the change or amendment proposed in such notice will not
result in any Material Adverse Effect and (B) a reference to this
Section 3.18 and must contain the following statement in bold,
uppercase type: "IF YOU WISH TO PREVENT THIS PROPOSED CHANGE OR
AMENDMENT FROM BECOMING EFFECTIVE, YOU MUST DELIVER A WRITTEN OBJECTION
TO THE AMENDMENT TO FINANCIAL PACIFIC LEASING, LLC WITHIN TEN BUSINESS
DAYS AFTER YOUR RECEIPT OF THIS NOTICE."
ARTICLE IV
ACCOUNTS; COLLECTIONS
Section 4.01. Accounts. The Collection Account, the Distribution
Account and the Reserve Account shall be established pursuant to Section 12.01
of the Loan Agreement.
Section 4.02. Collections. (a) The Servicer shall instruct the
Customers to remit payments on the Contracts only by mail and only to a post
office box that is under the control of a Lock-Box Bank pursuant to a Lock-Box
Agreement, except as otherwise directed or required pursuant to Section 4.02(c).
(b) The parties acknowledge that after the date hereof the Servicer may
enter into arrangements with one or more banks or other financial institutions
reasonably acceptable to the Lender (each a "Lock-Box Bank") for the receipt and
processing by the Lock-Box Banks of payments on Contracts sent by Customers to
post office boxes controlled by the Lock-Box Banks. The Servicer and the
Borrower shall give the Notice Parties reasonable prior written notice of the
effectiveness of any such arrangement, the names and addresses of the Lock-Box
Banks and the account number of each account maintained by such Lock-Box Bank
and into which Collections will be deposited (each a "Lock-Box Account"), and
shall provide the Notice Parties with copies of any agreements relating to the
Lock-Box Accounts (which agreements shall be in form and substance reasonably
acceptable to the Lender) and such other information as they may reasonably
request with respect to such arrangements. The Servicer shall execute and
deliver and shall require each Lock-Box Bank to execute and deliver, before any
Collections are deposited in any Lock-Box Account maintained by such Lock-Box
Bank, an agreement among the Servicer, the Collateral Agent, the Lock-Box Bank
and such other Persons as the Lender may require, in form and substance
reasonably satisfactory to the Lender (each a "Lock-Box Agreement"), covering
each such Lock-Box Account. Each Lock-Box Agreement shall include a provision
that, upon and after notice by the Lender to the Lock-Box Bank to the effect
that an Event of Default has occurred pursuant to the Loan Agreement, the
Lock-Box Bank will not withdraw or transfer any funds from such Lock-Box Account
unless and until, prior thereto or concurrently therewith, the Collateral Agent
shall have identified the portion of the funds in such Lock-Box Account which
constitute Collections and such portion shall have been transferred to the
Collection Account. The Lender agrees to give such notice, if at all, only after
the occurrence of an Event of Default. Within two Business Days after deposit of
any funds in
13 Servicing Agreement
any Lock-Box Account, the Servicer will identify the funds that constitute
Collections and instruct the Lock-Box Bank to transfer such collected funds into
the Collection Account. The Lender hereby grants the Servicer authorization
(which authorization may be revoked if an Event of Default has occurred) to
direct the Lock-Box Bank to transfer any other funds that do not constitute
Collections to such accounts or other persons as it may deem necessary.
(c) Upon the occurrence and during the continuance of an Event of
Default, the Lender may direct or require the Servicer to direct the Customers
to make all payments on Contracts to an account designated by the Lender.
Section 4.03. Application of Collections. All collections on a Contract
for each Collection Period shall be applied by the Servicer as follows: first,
to any Scheduled Payment, or portion thereof that is past due, second, to the
Scheduled Payment then due, third, to taxes owed or advanced by Servicer with
respect to such Contract, fourth, to insurance premiums owed or advanced by
Servicer with respect to such Contract, fifth, to other administrative fees and
similar charges, sixth, to any late charges related to such Contract, and
seventh, any excess remaining thereafter shall be applied to prepay such
Contract.
Section 4.04. Servicer Advances. If the payments by or on behalf of the
Customer on a Contract on the payment due date for such Contract in any
Collection Period are less than the Scheduled Payment, then the Servicer shall
advance four (4) Business Days prior to the Payment Date into the Distribution
Account any shortfall (such amount a "Servicer Advance"), to the extent that the
Servicer, in its sole discretion, shall determine that the Servicer Advance
shall be recoverable from the Customer, the Release Price, Recoveries or any
other proceeds of such Contract or the related Collateral. Each Servicer Advance
with respect to a Contract shall increase Outstanding Servicer Advances.
Outstanding Servicer Advances with respect to a Contract shall be reimbursed (a)
first from, and may be retained by Servicer from, subsequent payments by or on
behalf of the related Customer, Recoveries in respect of the related Contract,
or payments of the Release Price of the related Contract and (b) second,
pursuant to Section 3.03(b) of the Loan Agreement. In no event, including in the
event that Backup Servicer should become successor Servicer, shall the Backup
Servicer be required to make Servicer Advances. The ratios set forth in Section
8.01 of the Loan Agreement and the definition of Funding Termination Event set
forth in Appendix A to the Loan Agreement shall be calculated without taking
Servicer Advances into account.
If the Servicer shall determine that an Outstanding Servicer Advance
with respect to any Contract shall not be recoverable as aforesaid, the Servicer
shall be reimbursed in accordance with Section 3.03 of the Loan Agreement from
any collections made on unrelated Contracts included in the Collateral, and
Outstanding Servicer Advances with respect to such Contract shall be reduced
accordingly.
ARTICLE V
TERMINATION; TERM
Section 5.01. Termination of Servicer. If the Servicer is terminated in
accordance with Section 9.01 of the Loan Agreement, resigns pursuant to Section
2.04 of this Agreement or the
Servicing Agreement
14
Servicer's term expires pursuant to Section 5.03 of this Agreement, then the
Servicer shall be entitled to its pro rata share of the Servicing Fee for the
number of days in the Collection Period prior to the effective date of its
termination or resignation or the expiration of its term. On or after the
receipt by the Servicer of a written notice of termination delivered pursuant to
Section 9.01 of the Loan Agreement, the resignation of the Servicer in
accordance with Section 2.04 of this Agreement or the expiration of the
Servicer's term pursuant to Section 5.03 of this Agreement, all authority and
power of the Servicer under this Agreement and the other Loan Documents, whether
with respect to the Contracts or otherwise, shall, without further action, pass
to and be vested in (i) the Backup Servicer or (ii) such successor Servicer as
may be appointed under Section 5.02; provided, however, that the successor
Servicer shall have no liability with respect to any obligation which was
required to be performed by the predecessor Servicer prior to the date the
successor Servicer becomes the Servicer or any claim of a third party based on
any alleged action or inaction of the predecessor Servicer; and, without
limitation, the Lender and the Collateral Agent, on behalf of the Secured
Parties, are hereby authorized and empowered to execute and deliver, on behalf
of the predecessor Servicer, as attorney-in-fact or otherwise, any and all
documents and other instruments, and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, resignation or expiration, whether to complete the transfer and
endorsement of the Contracts and related documents, or otherwise. The
predecessor Servicer shall cooperate with the successor Servicer, the Lender and
the Collateral Agent in effecting the termination, resignation or expiration of
the responsibilities and rights of the predecessor Servicer under this Agreement
and the other Loan Documents, including the transfer to the successor Servicer
for administration by it of all cash amounts that shall at the time be held or
should have been held by the predecessor Servicer for deposit, or shall
thereafter be received with respect to a Contract and the delivery to the
successor Servicer of all files and records concerning the Contracts and a
computer tape in readable form containing all information necessary to enable
the successor Servicer to service the Contracts and the other property of the
Borrower. To the extent not paid pursuant to clause second of Section 3.03(b) of
the Loan Agreement, all reasonable out-of-pocket costs and expenses (including
attorneys' fees) incurred in connection with transferring the Required Documents
to the successor Servicer and amending this Agreement to reflect such succession
as Servicer pursuant to this Section 5.01 shall be paid by the predecessor
Servicer upon demand. The predecessor Servicer shall grant the Notice Parties
reasonable access to the predecessor Servicer's premises during normal business
hours at the predecessor Servicer's expense. The successor Servicer shall direct
the Customers to make all payments under the Contracts directly to the successor
Servicer at the predecessor Servicer's expense (in which event the successor
Servicer shall process such payments directly).
Section 5.02. Appointment of Successor Servicer. (a) Upon the
Servicer's receipt of notice of termination pursuant to Section 9.01 of the Loan
Agreement, the Servicer's resignation in accordance with Section 2.04 of this
Agreement or the Servicer's term expires pursuant to Section 5.03 of this
Agreement, the predecessor Servicer shall continue to perform its functions as
Servicer under this Agreement, in the case of termination, only until the date
specified in such termination notice or, if no such date is specified in a
notice of termination or in the case of such expiration, until a successor
Servicer acceptable to the Lender has assumed the obligations of the Servicer
hereunder and, in the case of resignation, until the later of (x) the date that
a successor Servicer acceptable to the Lender has assumed the obligations of the
Servicer hereunder in accordance with the terms of this Agreement and (y) the
date upon which the predecessor
15 Servicing Agreement
Servicer shall become unable to act as Servicer, as specified in the notice of
resignation and accompanying Opinion of Counsel. In the event of the termination
or resignation of, or the expiration of the term of, the Servicer, ▇▇▇▇▇ Fargo
Bank Minnesota, National Association, as Backup Servicer, shall assume the
obligations of Servicer hereunder on the date specified in such written notice
(the "Assumption Date") pursuant to an assumption agreement in form and
substance reasonably satisfactory to the Lender or, in the event that the Lender
shall have determined that a Person other than the Backup Servicer shall be the
successor Servicer, on the date of the execution of a written assumption
agreement by such Person in form and substance reasonably satisfactory to the
Lender. Notwithstanding the Backup Servicer's assumption of, and its agreement
to perform and observe, all duties, responsibilities and obligations of FinPac
as Servicer under this Agreement arising on and after the Assumption Date, the
Backup Servicer or any other successor to the Servicer shall have (i) no
liability with respect to any obligation which was required to be performed by
the terminated Servicer prior to the Assumption Date or any claim of a third
party based on any alleged action or inaction of the terminated Servicer, (ii)
no obligation to perform any repurchase or advancing obligations, if any, of the
Servicer pursuant to Sections 3.07 or 4.04 of this Agreement, (iii) no
obligation to pay any taxes required to be paid by the Servicer, (iv) no
obligation to pay any of the fees and expenses of any other party involved in
this transaction (except for those of any Person to whom such successor Servicer
delegates its duties pursuant to Section 3.17 of this Agreement), (v) no
liability or obligation with respect to any indemnification obligations of any
terminated Servicer pursuant to Section 2.02 of this Agreement and (vi) no
liability to the extent that the information necessary for servicing the
Contracts has not been provided to the successor Servicer by the terminated
Servicer.
(b) Upon appointment, the successor Servicer shall be the successor in
all respects to the predecessor Servicer and shall be subject to all the
responsibilities (except as set forth in the last sentence of paragraph (a)
above), duties, and liabilities arising thereafter relating thereto placed on
the predecessor Servicer, and shall be entitled to the Servicing Fee and all of
the rights granted to the predecessor Servicer, by the terms and provisions of
this Agreement.
(c) The Lender may exercise at any time its right to appoint as Backup
Servicer, or as successor Servicer, a Person other than the Person serving as
Backup Servicer or Servicer, as applicable, at the time, and shall have no
liability to the Collateral Agent, FinPac, the Borrower, the Person then serving
as Servicer or Backup Servicer or any other Person if the Lender does so.
Subject to Section 2.04, no provision of this Agreement shall be construed as
relieving the Backup Servicer of its obligation to succeed as successor Servicer
upon the termination of the Servicer pursuant to Section 5.01 or resignation of
the Servicer pursuant to Section 2.04 or expiration pursuant to Section 5.03.
(d) Notwithstanding anything contained in this Agreement to the
contrary, the successor Servicer is authorized to accept and rely on all of the
accounting records (including computer records) and work of the prior Servicer
relating to the Contracts (collectively, the "Predecessor Servicer Work
Product") without any audit or other examination thereof, and the successor
Servicer shall have no duty, responsibility, obligation or liability for the
acts and omissions of the prior Servicer. If any error, inaccuracy, omission or
incorrect or non-standard practice or procedure (collectively, "Errors") exist
in any Predecessor Servicer Work Product and such Errors make it materially more
difficult to service or should cause or materially contribute to the
16 Servicing Agreement
successor Servicer making or continuing any Errors (collectively, "Continued
Errors"), the successor Servicer shall have no duty, responsibility, obligation
or liability for such Continued Errors; provided, however, that the successor
Servicer agrees to use its best efforts to prevent further Continued Errors. In
the event that the successor Servicer becomes aware of Errors or Continued
Errors, it shall, with the prior consent of the Lender use its best efforts to
reconstruct and reconcile such data as is commercially reasonable to correct
such Errors and Continued Errors and to prevent future Continued Errors. The
successor Servicer shall be entitled to recover its costs thereby expended in
accordance with clause second of Section 3.03(b) of the Loan Agreement.
Section 5.03. Servicer's Term. The managing, servicing and
administering of, and making collections on, the Contracts shall be conducted by
the Person so designated from time to time as Servicer in accordance with this
Agreement. FinPac is hereby designated, and FinPac hereby covenants and agrees
to act as, Servicer under this Agreement for an initial term, commencing on the
Closing Date and ending on March 31, 2002, which term shall be extendible by the
Lender for successive quarterly terms ending on each successive June 30,
September 30, December 31 and March 31 thereafter, until the Total Outstanding
Advances, all accrued and unpaid interest thereon and all other Secured
Obligations have been paid in full; provided, however, that upon the occurrence
of an Event of Default, such term shall only be extendible by the Lender for
successive monthly terms ending on the last day of such successive calendar
month thereafter. Each notice of any such extension (each, a "Servicer Extension
Notice") shall be delivered by the Lender to the Borrower, the Servicer, the
Backup Servicer and the Collateral Agent; the Servicer hereby agrees that, as of
the date hereof and upon its receipt of any such Servicer Extension Notice, the
Servicer shall become bound, for the initial term described above and for the
duration of the term covered by such Servicer Extension Notice, to continue as
the Servicer subject to and in accordance with the other provisions of this
Agreement. The Servicer agrees that if as of the fifteenth (15th) day prior to
the last day of any term of the Servicer the Servicer shall not have received a
Servicer Extension Notice from the Lender, the Servicer shall, within five (5)
days thereafter, give written notice of such non-receipt to the Notice Parties,
and the Servicer's term shall not be extended unless a Servicer Extension Notice
is received by the Servicer on or before the last day of such term.
Section 5.04. Back-up Servicer as Servicer. Upon the appointment of the
Back-up Servicer as the Servicer pursuant to Section 5.01 of this Agreement,
every instance of the term "Servicer" in this agreement and the other Loan
Documents shall be deemed to mean the Back-up Servicer, unless the term "initial
Servicer" is used (which shall continue to be deemed to mean FinPac).
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.01. Termination. (a) Except with respect to a particular
party under Section 2.02 or Article V hereof, or this Article VI, the respective
duties and obligations of the parties hereto created by this Agreement shall
terminate upon the discharge of the Loan Agreement in accordance with its terms;
and the respective duties and obligations of the Collateral Agent shall
terminate with respect to the Collateral Agent in the event the Collateral
Servicing Agreement
17
Agent resigns or is replaced under Section 12 of the Custodial Agreement;
provided, however, that no resignation or removal of the Collateral Agent and no
appointment of a successor Collateral Agent shall become effective until the
acceptance of appointment by the successor Collateral Agent under Section 12 of
the Custodial Agreement. Upon the termination of this Agreement pursuant to this
Section 6.01(a), the Servicer shall pay all monies with respect to the
Collateral held by the Servicer and to which the Servicer is not entitled to the
Borrower or upon the Borrower's order.
(b) This Agreement shall not be automatically terminated as a result of
an Event of Default under the Loan Agreement or any action taken by the
Collateral Agent thereafter with respect thereto.
Section 6.02. Amendments. This Agreement may be amended or modified
from time to time by the parties hereto, but only in accordance with
Section 14.04 of the Loan Agreement.
Section 6.03. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE CHOICE OF LAW PROVISIONS THEREOF (OTHER THAN SECTIONS 5-1401 AND
5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
Section 6.04. Notices. All demands, notices and communications
hereunder shall be in writing and shall be delivered or mailed by registered or
certified United States mail, postage prepaid, and addressed, or by facsimile,
in each case as follows: (a) if to the Borrower, to Financial Pacific Funding
II, LLC, ▇▇▇▇ ▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇
▇▇▇▇▇▇, Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇, Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇; (b) if to
the Collateral Agent, to ▇▇▇▇▇ Fargo Bank Minnesota, National Association, Sixth
and Marquette Avenue, MAC N9311-161 ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
Corporate Trust Services -- Asset-Backed Administration, Facsimile No.: (617)
▇▇▇-▇▇▇▇, Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇; (c) if to the Servicer, to Financial
Pacific Leasing, LLC, ▇▇▇▇ ▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇ ▇▇▇▇▇▇, Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇, Telephone No.: (253)
▇▇▇-▇▇▇▇; (d) if to the Backup Servicer, to ▇▇▇▇▇ Fargo Bank Minnesota, National
Association, Sixth and Marquette Avenue, Minneapolis, MAC ▇▇▇▇▇-▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: Corporate Trust Services -- Asset-Backed Administration,
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇, Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇; (e) if to the
Lender, to Westside Funding Corporation, c/o AMACAR Group, L.L.C., ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇, Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇, with a
copy to Westdeutsche Landesbank Girozentrale, New York Branch, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇; Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇, Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇; and (f) if to the Hedge
Counterparty, to Westdeutsche Landesbank Girozentrale, New York Branch, ▇▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇;
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇, Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇. All notices and
demands shall be deemed to have been given (i) at the time of the delivery
thereof to any officer of the Person entitled to receive such notices and
demands at the address of such Person for notices hereunder, (ii) on the third
day after the mailing thereof to such address or (iii) when transmitted by
facsimile (evidenced by electronic receipt), as the case may be.
18 Servicing Agreement
Section 6.05. Severability of Provisions. If one or more of the
provisions of this Agreement shall be for any reason whatever held invalid, such
provisions shall be deemed severable from the remaining covenants and provisions
of this Agreement, and shall in no way affect the validity or enforceability of
such remaining provisions, the rights of any parties hereto, or the rights of
the Lender, the Hedge Counterparty or the Collateral Agent. To the extent
permitted by law, the parties hereto waive any provision of law which renders
any provision of this Agreement prohibited or unenforceable in any respect.
Section 6.06. Binding Effect. This Agreement will inure to the benefit
of and be binding upon the parties hereto and their respective successors and
permitted assigns. Except as may be otherwise provided in this Agreement, no
other Person will have any right or obligation hereunder.
Section 6.07. Headings and Captions. The table of contents and article
and section headings and captions in this Agreement are for convenience of
reference only, and shall not limit or otherwise affect the meaning hereof.
Section 6.08. Legal Holidays. In the case where the date on which any
action required to be taken, document required to be delivered or payment
required to be made is not a Business Day, such action, delivery or payment need
not be made on such date, but may be made on the next succeeding Business Day.
Section 6.09. Security for the Loan. The Servicer and the Backup
Servicer understand that the Borrower will pledge pursuant to the Loan Agreement
to the Collateral Agent, for the benefit of the Lender and the Hedge
Counterparty, all its right, title and interest to this Agreement. The Servicer
and the Backup Servicer consent to such pledge and further agree that all
representations, warranties, covenants and agreements of the Servicer and the
Backup Servicer made herein shall also be for the benefit of and inure to the
Lender, the Hedge Counterparty and the Collateral Agent and that the Lender, the
Hedge Counterparty and the Collateral Agent shall be entitled to enforce
directly against the Servicer and/or the Backup Servicer the provisions of this
Agreement.
Section 6.10. No Servicing Assignment. Notwithstanding anything to the
contrary contained herein, except as provided in Section 2.03 hereof, this
Agreement may not be assigned by the Borrower, the Servicer or the Backup
Servicer except in accordance with the express terms hereof without the prior
written consent of the Lender.
Section 6.11. Third-Party Beneficiaries. The Hedge Counterparty is an
express third party beneficiary of this Agreement, and shall be entitled to
enforce directly against the Servicer and/or the Backup Servicer the provisions
of this Agreement.
Section 6.12. SUBMISSION TO JURISDICTION; WAIVERS. EACH PARTY HERETO
HEREBY IRREVOCABLY AND UNCONDITIONALLY:
A. SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT
IN RESPECT THEREOF, TO
19 Servicing Agreement
THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK, THE FEDERAL COURTS OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE
COURTS FROM ANY THEREOF;
B. CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN
SUCH COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF
ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH
ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND
AGREES NOT TO PLEAD OR CLAIM THE SAME;
C. AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY
REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR
FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS DETERMINED IN
ACCORDANCE WITH SECTION 6.04 OF THIS AGREEMENT; AND
D. AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT
SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
SHALL LIMIT THE RIGHT TO ▇▇▇ IN ANY OTHER JURISDICTION.
Section 6.13. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY.
Section 6.14. No Proceedings. Each of the Servicer, the Borrower, the
Backup Servicer and the Collateral Agent agrees not to institute against, or
join any other Person in instituting against, the Lender any bankruptcy,
reorganization, arrangement, insolvency, liquidation or similar proceeding for
one year and a day after the amounts owing under the Loan Agreement and all
other credit agreements executed by the Lender have been paid in full.
Section 6.15. Counterparts. This Agreement may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
[SIGNATURE PAGES FOLLOW]
20 Servicing Agreement
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
date and year first above written.
FINANCIAL PACIFIC FUNDING II, LLC, as
Buyer
By: /s/ ▇▇▇▇ ▇. Winter
--------------------------------------
Name: ▇▇▇▇ ▇. Winter
Title: President of Financial Pacific
Leasing, LLC,
Sole Member
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FINANCIAL PACIFIC LEASING, LLC, as
Servicer
By: /s/ ▇▇▇▇ ▇. Winter
--------------------------------------
Name: ▇▇▇▇ ▇. Winter
Title: President
Servicing Agreement
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▇▇▇▇▇ FARGO BANK MINNESOTA, NATIONAL
ASSOCIATION, as Collateral Agent and
as Backup Servicer
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Assistant Vice President
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WESTSIDE FUNDING CORPORATION,
as Lender
By: Westdeutsche Landesbank Girozentrale,
New York Branch, as Administrator
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Director
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Director
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